Owner of Silver Forest Boutique Lodge and Spa in Cape Town, Penny Rodenhurst, describes herself as a British person who has invested millions in tourism in South Africa “with passion and enthusiasm”.
“What a mistake!” she says, highlighting that – due to her insurer refusing to pay out her Business Interruption (BI) insurance claims on the basis that she was closed due to lockdown not a COVID-19 outbreak on her premises* – her property now stands empty and she has, to date, had to retrench 23 staff members.
“We have had zero pay-out from our insurance company, Santam, we still face major overhead costs – including insurance (oh, the irony!), electricity, accountants and IT expenses that can’t be stopped – and many of the staff we had to retrench are the sole breadwinners in their families,” she highlighted to Tourism Update.
“So we’ve basically gone from a business that was on target to turn over R12m (€630 000) with a healthy nett profit of R5m (€260 000) by the end of the year to minus income, huge debt and stress,” highlighted Rodenhurst.
She said the owners had invested over R20m (€1.5m) to develop a unique boutique hotel in Somerset West. We further invested by way of a bond of R3.5m (€182 556) last November and opened a new Eatery Wine Bar and Cooking School at the hotel
“Blood, sweat and tears – that is the tourism industry in a good year. This is not a get-rich-quick scheme. It is hours of hard work focused on team development and hours and hours of passion and vision and drive to pay the staff, pay the overheads, and have some profit left at the end of the day,” related Rodenhurst.
She said the owner took out additional BI insurance because they knew if a fire or storm shut them down they would not have the cash to survive.
“The Santam Hotel and Leisure policy we have specifically also covered infectious diseases which, after the Ebola and Sars scares in the last few years, seemed like a good option.”
Therefore, Rodenhurst pointed out, when COVID-19 was declared a pandemic they saw rapid cancellations and a massive downturn in trade, they were comforted by the fact that they had the foresight to pay extra for BI and that Santam was a “large, wealthy reputable company”.
“Although we didn't expect it to replace trading turnover, we did expect it to cover property overheads and set costs at the very least so we could bubble wrap the business and be in a position to reopen at the right time,” she explained.
Seeking legal certainty
A Santam spokesperson has noted that the insurance major remains confident of its interpretation of causation as it applies to COVID-19-related business interruption losses, and says it has made appropriate provisions for such claims.
* Meanwhile the Financial Intermediaries Association (FIA) and Financial Services Conduct Authority (FSCA) has announced that the national lockdown cannot be used by any insurer as grounds to reject a claim.
Rodenhurst’s Silver Forest is one of over 500 businesses in the tourism and hospitality sector that have had their Business Interruption (BI) insurance claims denied by major insurance companies, despite them having the policy extensions required for a notifiable disease.
The claimants – with a total of R3.5bn (€179m) to R4bn (€205m) BI claims against several insurance agencies – are represented by loss adjustment firm, Insurance Claims Africa (ICA).
NOTE – What is your Business Interruption insurance story?
Tourism Update would like to highlight the personal stories of those tourism and hospitality sector businesses that are facing dire straits because their claims have not been paid out. Please send your story to email@example.com