Things aren’t looking good for South Africa’s short-term insurers in the ongoing legal battles around Covid-19 business interruption insurance claims.
Old Mutual Insure, a subsidiary of JSE-listed financial services giant Old Mutual, on Wednesday became the latest insurer to be ordered by the Western Cape High Court to pay out a disputed claim.
The court ruled in favour of Interfax, a small luggage retail chain with a handful of stores in the Western Cape. Interfax, owned by entrepreneur Chris Warncke, runs Luggage Warehouse outlets in Cape Town and Stellenbosch and a store called Waterfront Leathers at the V&A Waterfront.
According to the judgment by a full bench of the high court, Old Mutual Insure is obliged to indemnify Interfax’s pandemic-related losses for a period covering a maximum of six months and up to the maximum insured amount of R17.6 million.
The court also ordered Old Mutual Insure to pay Interfax’s legal costs for the application.
The case represents short-term insurers’ fourth loss in a row regarding business interruption claims by firms hit by the economic fallout of Covid-19. However, it is the first known judgment involving Old Mutual Insure and the first such case involving a retail business.
In July, Cape Town restaurant Café Chameleon won against Guardrisk Insurance (a Momentum Metropolitan subsidiary), which was appealed by Guardrisk in the Supreme Court of Appeal (SCA) this week (Monday). The SCA ruling is expected before the end of the year.
Last week, Ma-Afrika Hotels and Stellenbosch Kitchen won a similar case against Santam, while a second such case against Guardrisk was won by another restaurant, Fat Cactus.
Santam has said it will appeal the Ma-Afrika ruling. Old Mutual Insure is yet to confirm whether it will be appealing Wednesday’s Interfax judgment.
An elated Warncke tells Moneyweb that the ruling in Interfax’s favour is a welcome step, considering the woes the company has faced and continues to face due to Covid-19.
“We are ecstatic as this has been a very difficult time for us …
“Interfax has had to retrench about half of our 40 staff and close some outlets. To say that Covid-19 has decimated our business is an understatement,” he says.
“We really hope that Old Mutual Insure won’t appeal the high court ruling. However, if they do, we plan to stay on course and fight this battle together with our lawyers, Fairbridges Wertheim Becker Attorneys.”
Warncke thanked Fairbridges’ director of litigation Julia Penn as well as Andrew Brown, who was his legal counsel on the case.
Commenting on the win, Penn says it represents another significant ruling in favour of claimants related to desperately-needed Covid-19 business interruption insurance payouts.
“We filed this case with the Western Cape High Court as an urgent matter and it was heard by a full bench, which adds further significance to the victory …
“Interfax could go insolvent if it is not paid out. If it goes insolvent, then it can’t claim, so we need this to be settled as soon as possible,” she adds.
Penn notes that Old Mutual Insure has 15 days to appeal the ruling. She says the outcome of the Café Chameleon vs Guardrisk case at the SCA could influence Old Mutual’s decision to appeal or not.
Commenting on the Interfax ruling, Old Mutual Insure MD Garth Napier said in a statement to Moneyweb that the group “always regrets contract disputes with customers”. He did not comment on whether the insurer plans to appeal.
“As is evident from recent business interruption cases, these are highly complex matters. Therefore, we are currently carefully studying the judgment to determine the next steps,” he noted.
“Our philosophy throughout the Covid-19 crisis has been to pay valid claims and we have already set aside R650 million for these claim payments and for commercial settlements to our qualifying SME clients.”
“We have accepted valid business interruption claims which fall within the ambit of our policy wording and are busy settling these with interim payments while we await outstanding information from certain clients,” said Napier.
There are several pandemic-related business interruption insurance cases before the courts, however hundreds of mainly smaller tourism and hospitality businesses across the country have objected to the non-payment of claims, with insurers arguing that the government-induced lockdown is not an insured peril.