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South Africa insurer hit with COVID coverage verdict

Santam logo.jpg

In the latest victory for insureds attempting to get insurers to pay out on COVID-19-related business interruption claims, the South African High Court has ruled against Santam, South Africa’s largest short-term insurer.

Legal action was brought against the insurer by hospitality companies Ma-Afrika Hotels and Stellenbosch Kitchens, which had joined forces with public loss-adjustment company Insurance Claims Africa (ICA). The latter has been representing hundreds of tourism and hospitality businesses in an attempt to get insurers to compensate clients for BI claims.

The Western Cape High Court agreed with the approach of the UK Financial Conduct Authority in settling BI claims resulting from COVID-19 restrictions and found that Santam was liable for losses related to the pandemic and ensuing lockdown.

Santam has been ordered to pay the two hospitality companies for their BI losses over the 18-month policy period, as well as legal fees. The judgment cited similar COVID-19 and business interruption cases worldwide, including the U.S. and the U.K.

The insurer had denied claims from the two hospitality groups, claiming that regardless of whether there were COVID cases within the insurance-coverage radius, the businesses would still have been forced to suspend normal operations. In court, Santam argued that the policies insured against loss subject to the policies’ specific terms, not “economic hardship as a consequence of the COVID-19 pandemic.”

Additionally, Santam had unsuccessfully argued that COVID-19 is not a “notifiable disease” required by law to be reported to government authorities in order to allow for the collection of data and monitoring and provide early warning of possible spread of infection.

Guardrisk, another South Africa insurer, is currently appealing a ruling against it in a similar case.

This story originally appeared in Reactions.

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