A court case to decide whether many businesses receive insurance pay-outs for damage caused to them by the pandemic began on Monday, reports BBC news.
Following the lockdown, a host of businesses in the UK had to close their doors and many looked to insurers to cover their losses through their business interruption policies.
However, many insurers disputed these claims, arguing that such policies were never intended for losses caused by unprecedented measures such as government-imposed lockdowns.
The Financial Conduct Authority in the UK opted for the most logical way to resolve the matter by going to court. It selected 17 examples from business interruption insurance policies used by 16 insurers, eight of whom were asked to take part in the court case. Senior legal council will act for both insurers as well as the UK regulator.
The trial takes place over 8 days, on 20-23 July and 27-30 July. It can be viewed live at https://fl-2020-000018.sparq.me.uk/ (link is external).
As insurance policy wording is often very similar the world over, the outcome of this case could well have a significant impact locally. Most SA insurers have indicated that they will be led by overseas developments, as business interruption as a result of a reportable contagious disease is a totally new concept internationally.
In the first salvo of the battle between insurers and disgruntled policyholders, the Western Cape High Court found against Guardrisk, and ordered it to pay the claim by Café Chameleon. In respect of the crucial bone of contention, with the insurer claiming that the national lockdown was an insured peril, the judge noted:
“In these circumstances it is difficult not to accept that there is indeed a clear nexus between the Covid-19 outbreak and the regulatory regime that caused the interruption of the Applicant’s business. The suggestion therefore that the regulatory regime was only introduced to “flatten the curve” and had little to do with the Covid-19 outbreak is misplaced. In my view factual causation was established by the Applicant.”
Santam court case
The country’s biggest insurer has also opted to go the legal route in response to a complaint from Stellenbosch Kitchen and Ma-Afrika Hotels. A Fin24 report notes:
“Santam’s… defence rests on the fact that its business interruption policies clearly state that a local authority must stipulate that it’s a notifiable disease, not national government or international bodies. The policy, and specifically the wording relevant to the infectious diseases extension, reveal an intention to provide cover against local events. A global and national pandemic, such as Covid-19, was clearly not contemplated by the policy,’ wrote Santam’s head of hospitality and leisure, Juan Owen Coetzee.
This case is scheduled for 1 September. Santam has waived the prescription clauses in qualifying policies until 1 October.