Santam: High Court ‘erred’ in business interruption judgment

JSE-listed Santam believes that the Western Cape High Court’s Ma-Afrika business interruption insurance judgment, handed down in November and linked to the Covid-19 pandemic, does not set a legal precedent for the indemnity period for all other such policies.

The short-term insurance giant went further in a statement sent to Moneyweb, saying that it is of the view the High Court “erred in its judgment in applying an 18-month indemnity period across the entire policy” of the Cape-based hotel group.


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Santam’s comments on the case and the broader business interruption insurance debacle comes in the wake of the latest salvo on the issue on Tuesday from specialist public loss adjustment firm, Insurance Claims Africa (ICA).

Read: Santam business interruption settlement offer unconscionable: ICA

“The judgment of the Western Cape High Court on the indemnity period applies only to the Ma-Afrika policy. Santam’s view is that the indemnity period is limited to three months as stated in the Ma-Afrika policy. However, the court ruled that, for the Ma-Afrika policy, the indemnity period is 18 months,” Santam pointed out in its statement.

The group is appealing the indemnity period aspect of the judgment at the Supreme Court of Appeal (SCA) in Bloemfontein.

An “indemnity period” refers to the maximum period (in months) for which a policyholder can claim for losses in a business interruption policy.

Following a landmark SCA ruling in December in another case involving Cape restaurant Café Chameleon and short-term insurance industry peer Guardrisk, Santam announced on January 4 that it would start assessing business interruption claims that were specifically impacted by the Ma-Afrika  and Café Chameleon judgments.

However, Santam’s final settlement offer to affected policyholders is limited to three months. The move has raised the ire of ICA, which claims that Santam is short-changing its clients largely in the embattled tourism and hospitality industry.


Santam to start assessing some rejected Covid-19 claims

In its latest statement on the issue, Santam also says it is important to note that the SCA judgment in the Café Chameleon case did not and was not required to deal the with the 18-month indemnity period. Consequently, Santam is appealing the indemnity period aspect of the Ma-Afrika case.

Santam further stressed the differences between normal business interruption cover and policies that have additional cover for loss of income while a business is forced to close.

“Businesses generally have an insurance policy that covers property damage by fires, floods and other perils causing physical damage to the insured premises… In addition, businesses have the option to take out cover for loss of revenue for an agreed period while they are not able to operate because of physical damage to their business premises,” it points out.

“This is a standard business interruption policy for physical damage. The indemnity period in the standard cover provided by the business interruption section policy in the Ma-Afrika policy is 18 months. This is not common across all policies.  Most policies generally have shorter indemnity periods,” Santam adds.

“Some policies offer extensions to the business interruption insurance which covers loss of revenue caused by interruption to the business by a number of events beyond physical damage, including infectious diseases. The indemnity period in respect of this extended cover is clearly stated as three months in the relevant Santam policies,” the group explains.

Meanwhile, Santam denied accusations from ICA and several affected policyholders that it was attempting to delay the process in paying out Covid-19 linked business interruption insurance claims.


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“Santam has consistently said that it was pursuing a speedy resolution of the matter. The Santam [Ma-Afrika] case was heard on 8 September 2020 and judgment was issued on 17 November. In a related case involving Café Chameleon and Guardrisk, the SCA issued its judgment on 17 December 2020,” the group notes in its statement.

“Only at that point could Santam consider the matter as having reached final legal clarity. Following engagement with its stakeholders, Santam announced on 4 January 2021 that it would start assessing business interruption claims that were specifically impacted by the judgments,” it points out.

Santam reiterated that it respects the decision of the courts.

The group says that it believes that the recent court judgments are sufficient to provide legal certainty in terms of the proximate cause of business interruption losses for policies with the same conditions, characteristics and circumstances to the Ma-Afrika and Café Chameleon judgments.

“The process of seeking legal clarity was agreed by all parties concerned and therefore it is untrue that Santam has attempted to delay the process…Whilst awaiting legal clarity, Santam paid out R1 billion in interim relief to 2 500 SMEs that had Contingent Business Interruption [CBI] cover,” it points out.

“Santam and a few other South African insurers are the only insurers in the world that are known to have offered interim relief to clients whilst awaiting final legal clarity,” the group says.

“It is important to appreciate that the CBI matters are global in nature, impacting multiple stakeholders including reinsurers who are effectively the insurer’s insurer. In the key jurisdictions, including the UK, this matter has not yet been finalised due to its complex nature,” Santam added.

Read: Insurers make concessions in business interruption cover battle

“As previously stated, the 18-month indemnity period applies only to the Ma-Afrika policy and can therefore not be construed as legal precedent, particularly in view of Santam’s intention to appeal this ruling,” the group reiterated.

“The Hospitality & Leisure Division policies that are impacted by the recent court rulings and are currently being processed by Santam specifically carry three-month indemnity periods. It is for this reason that Santam is offering full and final settlements in respect of these claims.”

Meanwhile, Santam also clarified that businesses that have incurred claimable losses and have gone into liquidation post March 2020 can still claim against their policies with CBI extensions.

However, ICA tells Moneyweb that the policy wording stipulates that it is up to the insurer to give a written waiver to clients on whether they can claim if such businesses go into liquidation.