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Business interruption cover – Insurers facing an avalanche of bad press

In what Moneyweb terms “…a David and Goliath clash…”, the media has joined the fray in highlighting the matter.

While several moving emotional pleas were made, there is also legal action.

According to Moneyweb Ryan Woolley, CEO of ICA, said that his group is now representing more than 500 mainly tourism and hospitality industry businesses in the battle with insurance groups. This excludes hundreds of similar Covid-19 business interruption insurance disputes being handled by other firms and attorneys in the country, which will most likely take the claims to several billion rand.

Their efforts to come to an agreement was rejected by the insurers on the grounds that not all those who were included in the group had the contagious disease extension in their contracts.

A court case involving the owner of a boutique hotel and restaurant group, set for early September, is likely to provide clarity on what constitutes a legal claim. Insurers are adamant that the national lockdown was not the insured peril, while claimants argue that the lockdown was the direct result of the Covid-19 virus.

One insurer’s “Contingent Business Interruption” clause contains a condition that the disease should have been present at the premise or within a fifty kilometre radius, and that access to the area should have been restricted by a municipal, regional or government authority. This did in fact happen, and before the actual date of the lockdown.

Another important consideration which needs to be borne in mind is the legal principle that uncertainty in an insurance policy is construed against the insurer, as it is the duty of the insurer to provide clarity on what risks are excluded.

The fact that most claim repudiations took five weeks and longer would seem to indicate that insurers, too, did not have absolute clarity on the matter.

It appears that some insurers are still negotiating with the FSCA on its guidelines contained in FSCA Communication 34 of 2020 on which conditions, when met, should lead to the payment of claims.

Given the huge role the hospitality industry plays in terms of employment, and its contribution to the stuttering economy, it is essential that legal clarity is obtained as soon as possible.

For many affected policyholders whose income has been reduced to zero over the last three months, their single biggest current expense is, ironically, their insurance premium. They cannot afford not to pay this, as it would mean forfeiting future claims, should the courts find in their favour.

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