The Supreme Court of Appeal (SCA) on Thursday dismissed Santam’s appeal and upheld the Western Cape High Court’s landmark Covid-related business interruption insurance judgment in favour of Ma-Afrika Hotels and Stellenbosch Kitchen.
This represents a major final win for the tourism and hospitality businesses, and consequently a big final blow for SA’s biggest short-term insurer and its peers that have been fighting the issue tooth and nail right up to the SCA.
Read more on the case here.
It is unlikely that Santam will take the matter to the Constitutional Court, as this court does not generally deal with commercial matters.
The SCA’s decision means that Santam is obligated to pay Ma-Afrika Hotels and Stellenbosch Kitchen for the full 18-month period of its policies.
“We are most grateful to the honourable judges of the SCA since originally Santam had argued that they had no obligation in terms of the policy,” André Pieterse, chairman and CEO of Ma-Afrika Hotels said in a statement.
“However, following the judgment in the Cape High Court in November 2020, Santam acknowledged their liability, but argued that it was only liable for three-months despite the full bench of the Western Cape High Court having rejected their argument,” he explained.
Ryan Woolley, CEO of Insurance Claims Africa (ICA) hailed the SCA decision, saying that “it provides much needed certainty for the finalisation of outstanding claims for businesses in the tourism and hospitality sector, [that have] had to wait more than 18-months for valid claims to be settled.”
He added that the court’s decision in the matter is crucial for thousands of Santam’s hospitality & leisure division’s business interruption policyholders.
“Once the claims are settled by insurers, funds will flow to assist a desperate sector of the economy … We all know that the endless litigation and slow progress on payment of claims by certain insurers has had a devastating impact on businesses in a sector that remains severely challenged by the pandemic, affecting the lives of thousands of employees and their dependents,” noted Woolley.
“The behaviour of insurers throughout this debacle has been a travesty …
“In essence, they chose to abandon their customers in their darkest time of need. This has impacted not only the reputations of short-term insurance companies, but also insurance as an overall category. Their Stalingrad strategy of ‘deny, delay and defend’ has eroded the public’s trust in insurance and we anticipate that it will take significant effort, commitment and time to restore customers’ faith in the sector,” he reiterated.
Woolley extended his gratitude and congratulations to the entire legal team and to Pieterse and his colleagues at Ma-Afrika Hotels.
Santam said in a statement, issued on Thursday afternoon, that it accepts the SCA decision, and it aims to finalise such claims as quickly as possible.
“Santam is pleased that a judgment handed down today by the SCA has brought legal clarity and finality on the interpretation and application of certain contingent business interruption (CBI) policies,” the group added.
“We recognise that Covid-19 has had a devastating effect on the economy and in particular on businesses. We also understand that our clients were affected by the process of attaining legal certainty on this one remaining CBI matter,” said outgoing Santam Group CEO Lizé Lambrechts.
“We are however very pleased that this judgment allows us to proceed to finalise all impacted CBI claims as soon as possible in-line with the ruling of the SCA,” she added.
Santam pointed out that the judgment affects less than a third of the 3 200 notified CBI claims, specifically some policyholders in its hospitality & leisure division.
“The insurer has already made significant progress in processing CBI claims and has so far paid more than R2.1 billion, including more than R1.1 billion since January 2021,” the group said.
“Today’s judgment provides the clarity and certainty we and our clients have been looking for. At the same time, we will take positive lessons from the process,” declared Lambrechts.
She noted that Covid-19 was a once-in-a-lifetime event that affected the entire population and economy which also raised key challenges for non-life insurers, regulators, intermediaries and reinsurers globally.
“We therefore had to consult widely on how our policies would respond to a pandemic,” Lambrechts said.
“Getting legal clarity in the face of uncertainty about some policies was essential so that Santam could respond to and balance the interests of the full spectrum of clients and other stakeholders,” she added.
Meanwhile, Santam said that it has already put measures in place to ensure that the wording of its business interruption policies is as clear as possible to avoid uncertainty about cover.
Santam’s share price was not affected by the SCA decision on Thursday. In fact, the stock was trading marginally up at around R258 a share.