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Business Interruption Claims – Black Friday of a different kind for Insurers

Guardrisk and Santam found themselves at the wrong end of the outcomes in two Cape High Court cases last week. On Tuesday, a full bench of the court ruled that Santam was liable to settle the claims submitted by Ma-Afrika Hotels and Stellenbosch Kitchen. On Friday, the same court ruled against Guardrisk for the second time. As one headline read: Insurers 0 – insureds 3.

Santam immediately indicated that it would appeal the finding. In a SENS announcement it noted:

Santam believes that the Western Cape High Court erred in its judgement regarding causation and the insured peril, the trends clause and the indemnity period, and is therefore seeking leave to appeal to a higher court. Santam is of the view that its catastrophe reinsurance will limit the net cost of contingent business interruption claims. However, the extent of the reinsurance recoveries will ultimately depend on the response of reinsurers to the outcome of the legal process.

Its bid to have Guardrisk’s SCA Covid-19-related business interruption insurance hearing against Café Chameleon postponed so that it could join the appeal in the landmark matter, failed in the SCA on Monday, according to Legalbrief Today. Judgment was reserved in the Guardrisk appeal hearing, with a decision expected before the end of the year.

Request to join appeals

Legalbrief Today reports as follows on the request to join the Guardrisk appeal:

‘Santam’s view is that it would be appropriate for the appeals on both matters to be heard together on an expedited basis. It is undesirable that two matters on such similar facts and of such importance to the hospitality and insurance industries be the subject of two judgments of this honourable court handed down several months apart.’ According to Moneyweb, it added: ‘Santam, if and when leave to appeal is granted, will be in the position to file the court record within a very short time and to file heads of argument in whatever shortened period of time this honourable court may suggest and to argue the consolidated appeals as soon as possible as directed by this honourable court’. Guardrisk’s attorneys, Clyde & Co’s letter took a similar line. ‘Guardrisk believes that it is in the interests of justice that parties with an interest in an issue should be heard. Furthermore, additional arguments, which may have a different perspective, may assist the court,’ it said, according to Moneyweb.”

Whilst these arguments may be valid from the perspective of the insurers, affected policyholders would possibly disagree. The outcome of the Café Chameleon appeal case should actually benefit Santam who called for the urgent need for “…certainty and clarity as soon as possible for the insurance and hospitality industries…” As stated above, these are “…two matters on such similar facts…” that an appeal by Santam may not be necessary in its quest for legal certainty.

The Fat Cactus sings

In the second ruling against Guardrisk, Judge AJ Norton, in paragraph 62 and 63, notes:

The construction advanced by the applicants, however, has been upheld by this court in Café Chameleon and Ma-Afrika Hotels and finds support in the decision of the Queen’s Bench in FCA.

The decision of a full bench of this court in Ma-Afrika Hotels is binding upon me unless I find it to be distinguishable. I consider that there is no basis upon which it can be distinguished. The clause under consideration in that case was in precisely the same terms as the disease clause before me (save that the specified radius was 40 kilometres) and the factual premises of the decision – that the measures taken by the South African government under the Disaster Act were a response to the COVID-19 pandemic and that the insured’s business interruption loss had been caused by the COVID-19 pandemic and the government’s response to it — are matters of common cause in this application.

Relief granted

The respondent was directed to process all claims submitted by the applicants within 10 days of receipt of any such claim and supporting documentation and to pay all amounts owing under said claims within a further 5 days. In addition, it was ordered to pay the costs of the application.

In addition, the applicants were given leave to approach the court on the same papers, for further relief as may be necessary, including clarification, incidental or payment relief.

Breaking news

News just to hand is that a third insurer lost a Business Interruption case.

A full bench of the Cape High Court found Old Mutual Insure liable to pay the claim by a luggage retailer. This adds a new twist to the ongoing saga, and increased headache for the beleaguered non-life insurers.

Click here to read the full Moneyweb article.

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