Santam business interruption settlement offer unconscionable: ICA

Despite SA’s largest JSE-listed short-term insurer Santam now offering a three-month full and final settlement offer to clients that have Covid-19 business interruption insurance claims, its move to limit the payout period has been lambasted by specialist public loss adjustment firm Insurance Claims Africa (ICA).

ICA CEO Ryan Wooley has not relented in his criticism of Santam and other insurers, like Old Mutual Insure and Bryte, in relation to the handling of the drawn-out claims battle.

Issuing its latest salvo in a statement on Tuesday, ICA – which represents around 700 clients in relation to such claims – called Santam’s settlement offer “unconscionable” since policyholders are covered for longer periods.

Read: Santam to start assessing some rejected Covid-19 claims

The firm said Santam’s latest actions suggest that legal certainty is no longer the objective, adding that the insurer is trying to take advantage of vulnerable clients who are desperate for funding.

“ICA is unsurprised but disappointed by Santam’s decision to limit its full and final settlement offers to three months, while there is an appeal pending at the SCA [Supreme Court of Appeal] in respect of the indemnity period,” it said.

“ICA anticipates that insurers will be very aggressive on quantum in an attempt to limit what they owe claimants.”

It added: “After almost seven months of legal wrangling, constant delays and Santam’s dogged refusal to pay its customers’ business interruption claims, Santam has conceded it is liable and that it will commence the process of assessing claims.

“However, Santam has said it will offer its hospitality & leisure customers a full and final settlement of only three months of losses, despite many policyholders having indemnity periods of six, 12, and 18 months in their contracts with the insurer.”

“The problem for Santam is that they have a judgment against them in the Ma-Afrika matter, which orders the insurer to pay for the full indemnity period of 18 months,” says Woolley.

“This should not be ignored. The only way for them to treat their customers fairly is to offer an interim payment of three months and leave the balance to be dealt with after the SCA appeal,” he adds.

“Offering three months in full and final settlement, and forcing their customers to sue them for the balance, is grossly unfair and unconscionable.”

Insurers’ argument

Santam and other insurers have argued that it was the government-imposed lockdown, and not Covid-19, that caused the losses. The courts however have found that the two events are linked – a lockdown would never have occurred without Covid-19.

In November 2020, the Western Cape High Court ordered Santam to pay Ma-Afrika Hotels and Stellenbosch Kitchen for the full 18-month period of its contract. However, Santam has now said it will concede liability and only appeal the question of the indemnity period at the SCA.

Santam is set to argue for leave to appeal the Ma-Afrika judgment on February 16.

“While we are encouraged by Santam’s acknowledgement that legal certainty has been established, they continue to pick and choose what suits them in the court rulings,” says Woolley.

“Santam’s Stalingrad strategy of delay, deny and defend has put its customers under excruciating financial stress,” he adds.

“The real tragedy is that if these businesses are forced to shut down as a result of Santam’s non-payment, their claim against the insurer is extinguished.

“Offering a full and final three-month settlement on a valid 18-month contract is unacceptable.

‘Arrogance’

“Shareholders should be questioning who has given this strategy to Santam as it demonstrates a lack of respect for their customers, the South African judiciary, and the Financial Sector Conduct Authority, and displays a level of arrogance that no matter how poorly you treat your customers they will remain loyal,” says Woolley.

According to ICA, Santam has said that each policyholder will need to take it to court individually to challenge the indemnity period beyond the three months it is willing to pay.

“This latest cynical and devastating move proves how disingenuous Santam is,” says Woolley.

“Policyholders who are already financially decimated will now have to find the money to fight the insurer in court to enforce the indemnity periods contained in their contracts.”

Santam is yet to comment on ICA’s salvo on the debacle.

Meanwhile, Old Mutual Insure and Bryte have largely remained silent on the recent industry-related court rulings.

Read: Old Mutual Insure the latest loser in Covid-19 claims battle

“While it’s clear that Hollard, Santam and Guardrisk have finally recognised the legal certainty provided by eight high court and five supreme court judges, there is deafening silence from Bryte, Old Mutual Insure and Factory & Industrial in respect of these judgments,” says Woolley.

“Business interruption insurance exists to help businesses survive following an unanticipated event. Thousands of businesses bought these policies, which included cover for infectious, contagious and notifiable diseases, but when the pandemic occurred, the insurance industry turned their back on their customers, claiming all manner of excuses to wriggle out of their obligations.”

Woolley says ICA will continue to fight for affected businesses, largely in the “desperately vulnerable” tourism and hospitality sector.