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Guardrisk to appeal High Court business interruption insurance judgment

Notes appeal process is likely to be lengthy
Café Chameleon restaurant in Cape Town. Image: Supplied

Guardrisk – the short-term insurance subsidiary of JSE-listed financial services giant Momentum Metropolitan – has confirmed it will be appealing the Western Cape High Court ruling that it must pay-out a business interruption insurance claim to local restaurant Café Chameleon.

This follows the Cape town establishment successfully securing at declaratory order against Guardrisk in a landmark victory in late June for non-payment of a claim linked to the Covid-19 pandemic.

Read: Cape café’s ‘precedent setting’ business interruption insurance victory

Listen: Cape Town café wins business interruption insurance case

“After careful consideration, we have decided to approach the court for leave to appeal the judgment. It is important that we do so in order to obtain certainty for the industry, our business and for our policyholders going forward,” Guardrisk said in a statement issued to Moneyweb.

“The issues we are grappling with, as highlighted by the court proceedings, are not confined to Guardrisk, or even to South Africa, as is evident by the extent of litigation around the same issues currently occurring in the USA, UK, Europe, and Australia,” it noted.

“We are in continuous consultation with the relevant authorities to ensure that we deal with claimants and all policyholders fairly. This appeal process is likely to be lengthy and as stated, Guardrisk is committed, via HIC, our appointed underwriting manager and its brokers, to implement relief measures that will enable policyholders to weather this challenging time,” it added.

Read: Insurers cannot use lockdown as grounds to reject claims – FCSA

Guardrisk’s move and statement comes despite the Financial Sector Conduct Authority (FSCA) last week issuing a strongly worded statement saying that the national lockdown (to initially curb the spread of Covid-19) cannot be used by any insurer as grounds to reject a claim related to business interruption insurance policies that have infectious disease cover.

“The devastation that the Covid-19 pandemic and the lockdown regulations have and continue to wreak on us as a society is unprecedented,” Guardrisk noted in its latest statement.

“The extraordinary scale of the economic fallout in South Africa resulting from this, has reaffirmed that we, as Guardrisk, have an important role to play in helping people to navigate through this difficult time,” the group added.

“As such, we have been exploring avenues to provide support to businesses in the tourism and hospitality sector to help keep their doors open. We are continuing this process to implement measures of support and we will communicate these to our policyholders as soon as possible,” it said, but did not go into detail as to what these support measures actually entails.


Business interrupted, but insurers don’t want to pay
Hoteliers plead for Covid-19 business interruption insurance payouts

Responding to Guardrisk’s decision to appeal the judgment, Café Chameleon’s lawyer Ren Dunster of Dunster Attorneys said he is aware of the move, but that leave to appeal still needs to be by granted the courts.

“I think everyone is presuming that leave to appeal will be granted because of its [the case’s] significance, but the reality is that this is a solid judgement,” he told Moneyweb.

“Now that Guardrisk have advised that they are appealing, we would first need to consider their grounds for an appeal, but at the moment I have no reason to doubt the finding… If leave for appeal were to be granted, we are confident the SCA [Supreme Court of Appeal] will confirm the High Court judgment,” he added.

Dunster said that if the case goes on appeal, he will push for it to be expedited considering “the desperate situation, not just for Café Chameleon, but so many other businesses in the tourism and hospitality industry”. He said he is confident of success even in an appeal case.

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After the FCSA statement and the strong wording of the judge, risking contempt. How can a higher court now make a ruling that contradicts the finding of the sector regulator as well as the lower court?

maybe a stupid comment…..but why doesn’t the insurance companies in a class action in turn hold the government to accountability?

Good question. Surely the SA insurers can claim from SASRIA (state owned insurer)? Government action, riots, strikes and terrorism are usually excluded from cover in other countries, but in SA SASRIA covers riots and strikes and insurers pay a premium for that cover. Government should pay

The government has nothing to do with the current issue of insurance for communicable disease. The Government took action to prevent the spread and they were right to do so. Insurers trying to go against Government is not a solution. Insurers have reinsurers “behind” them to cover for their commitments if I am not mistaken.

I don’t think this is stupid at all. They have already lost their case, and I believe their case against the government is a much stronger one. They will lose their case against the insured in the constitutional court eventually. I have no doubt about that. However if they lodge a claim against the government which has caused this loss due to irrational lockdown rules which they implemented based on grossly inaccurate models of predicted Corona deaths, which was further exacerbated by the fact that the modellers on whom the government relied did not revise their frightful predictions despite fundamental errors being highlighted for them by groups like PANDA. World wide Corona developments have also come into play when it comes to government policy. So this is a fight best fought out between the insurer and government and the sooner they realise this the better. They will in fact make up the difference in financial outcome through a better risk loss against the government as compared to the insured and then there is the goodwill factor to consider.

Insurers are betting the affected business will go bust long before the appeal can be finalized. David VS Goliath

When insurance companies make claims such as: “We are committed to implement relief measures that will enable policyholders to weather this challenging time”, I interpret it as: “We will always do our utmost to ensure that we limit our client pay-outs as much as humanly possible.

Just my own interpretation, of course.

End of comments.





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