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‘Tsunami’ of legal certainty, now insurers must pay up

UK business interruption test case ruling reinforces hospitality industry calls for Covid-19 claims to be settled.
Any further delays in the payment of claims will certainly no longer be as a result of insurers requiring legal certainty on the matter. Image: Shutterstock

Short-term insurers now have a “tsunami of the legal certainty” around business interruption insurance claims linked to the Covid-19 pandemic and need to pay up.

That’s the word from the Federated Hospitality Association of South Africa (Fedhasa), an umbrella body that represents hotels, restaurants and other hospitality businesses.

Rosemary Anderson, Fedhasa’s national chairperson, has called on insurers to “do the right thing” and settle such claims in full, following yet another loss for insurers – this time in the UK Supreme Court.

The court on Friday ruled in favour of claimants in a precedent-setting test case that was brought by that country’s Financial Conduct Authority (FCA).

The outcome is noteworthy for South Africa, especially considering that the landmark Café Chameleon vs Guardrisk High Court case was cited in earlier proceedings of the UK case.

Read: Massive Covid-19 blow for insurers: Guardrisk loses Supreme Court appeal

South Africa’s own financial watchdog – the Financial Sector Conduct Authority (FSCA) – has also been keenly watching the UK test case. However, Guardrisk losing its appeal against the Café Chameleon High Court judgment at SA’s Supreme Court of Appeal (SCA) in December set a local precedent in Covid-19-related business interruption insurance court battles.

Fedhasa noted in a statement issued on the weekend that the UK and South African supreme court rulings “support [the] validity of policyholders’ business interruption insurance claims”. The association reiterated calls that it has been making since last year for insurers to settle such claims, especially for the embattled tourism and hospitality industry.

“If legal certainty is what the insurers needed for their reinsurers to extend support, then certainly this has been achieved,” said Anderson.

“In both the cases in the UK and South Africa, it is clear the courts have ruled in favour of policyholders.

“Any delays [in payment] would seem to be no longer as a result of insurers requiring legal certainty,” she adds.

According to Fedhasa, the UK Supreme Court ruling unanimously dismissed all insurers’ appeals. However, the court did allow all of the FCA’s four grounds of appeal, with qualifications attached to two of the four.

“This last ruling is one of several, which have ruled in favour of policyholders and confirmed that government’s imposition of a lockdown in response to multiple outbreaks of a notifiable disease [Covid-19], was covered by the insurers’ infectious diseases clause,” it noted.

A step closer to settlement

Anderson points out that while the UK judgment may be geographically distant to the situation on the ground in South Africa, it does provide further compelling evidence that beleaguered hospitality businesses with outstanding business interruption claims are a step closer to having these settled.

“It couldn’t have come sooner with amended Level 3 restrictions and a second surge in Covid-19 cases all but decimating an already devastated sector,” she says.

“We hope that with this additional legal certainty, insurers will recognise and swiftly act on their responsibilities to their hospitality customers who have been faithfully paying their premiums for all these years …

“We will not easily forget the way our industry has been treated by insurers, which are household names,” she adds.

“In fact, the statement by one UK Supreme Court Judge, Lord Briggs, in handing down judgment is a clear indictment against insurers’ business interruption policies, which he says appear to have been ‘clearly contrary to the spirit and intent’ of the cover that hospitality businesses secured to protect themselves against the effects of a national pandemic type of notifiable disease.”

Read:

On the local front, Hollard and Guardrisk agreed to pay out such claims a few weeks after the Café Chameleon SCA ruling.

Earlier this month, Santam also agreed to pay out such claims. However, the group has limited settlements to a three-month indemnity period and is appealing a separate business interruption insurance case at the SCA involving Ma-Afrika Hotels.

Old Mutual Insure is yet to comment on any new settlements of such claims, while Bryte Insurance revealed in a letter to clients last week that it would be looking into settling claims now.

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Love it!

Justice at last

Well, 5 years from now we’ll have this group of claimants to blame for the fact that it’ll be impossible to get business interruption insurance for any kind of medical/disease-related hazard.

And right now it’s merely a transfer from policyholders in general to the hospitality industry (and lawyers). Sort of Eat Out to Help Out except we don’t get any food.

I don’t agree with your comment

Why do the insurance companies have such products in the first place? Because the return is high and the risk low, so they collect and collect:

Until Covid came along, now they are shouting foul

Like most of us, we pay home insurance for years without claiming..
Until the common wall between myself and a neighbour collapsed due to a “creeper’s” weight that pulled it over. No fault of mine albeit my creeper

Santam refused to pay claiming it’s not part of the main structure

I cancelled my policy (Home insurance,contents, business and vehicles) and moved on ..So i have the choice of choosing an Insurance company (the company i moved to covers common walls without being specified) Needless to say Santam won’t ever see me again

In as much as Insurance Companies sell various products, so too i have a choice what i’d like to insure and with whom!

If a pandemic occurs and i’m insured for loss of income, why do they rescind on paying the claim? The courts found their action illegal, so that in itself says enough

Point in case are a few homes in Knysna after the destructive fire.. Some insurance companies insisted the home be rebuilt from the remains of the skeleton, yet the owners engineers do not recommend this..Result: catch 22 no payout, house skeleton remains, court cases upon court cases..Is that fair? I don’t think so

Banks, Insurance companies..Bug Brother always has us at the short and curly’s

It’s about time the consumer wins a case

“The court on Friday ruled in favour of claimants in a precedent-setting test case that was brought by that country’s Financial Conduct Authority (FCA).”
Akin to endless cases in history where the enrichment of the few at the expense of the many was thought to be finally ended by a non-corrupt authority of actual Justice, the likes of which were long since usurped by the money-power.
Which makes this ruling yet another rare event in the history of the struggles for a fair and honest society across all time and not just for a single generation followed by a reversion to the former corruption.

The Santam share price is going up but they seem to be difficult paying claims.

The flash floods in Randburg (28-Dec-20) took down a few boundary walls in my kids townhouse complex and now they have rejected the claim by classifying the boundary walls as retainer walls (Walls built to stop the ground from moving).

Classic.

Also classic is the ridiculous proximate cause fallacy that they’re hiding behind. “Sorry, we’re not paying for the damage to your car. You’re only covered for collisions, but it wasn’t the collision that damaged your car, it was the sudden stop.”

Don’t think that’s the problem, terrible insurance PR/legal notwithstanding.

The problem is that they never intended to cover a situation in which an entire highway’s worth of cars all crashed into one another at the same time. Perhaps a UFO appeared in the sky. Everyone’s bickering about whether or not it was a UFO, meanwhile it’s the distribution or concurrency of the claims that makes them difficult to insure against. Insurers are not interested in offering coverage for events that distribute widely *and simultaneously* regardless of their rarity.

Just think about what this notifiable-disease business-interruption coverage was intended to mean: Salmonella in the kitchen, for example, requiring a shutdown and deep-clean… of *one* restaurant. (And for days, not months!)

All this nonsense about the “spirit” of it, but nobody’s bothering to ask what was intended by the actual contracts.

Don’t worry, they will still find excuses not to pay.

Insurance. Poor and dodgy.

The more I read about the rejection and dilly-dallying of the well-known insurer, the more I am tempted to cancel all my insurance and investments with them and to go somewhere else.

End of comments.

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