Today (October 7) the Supreme Court of Appeal dismissed major insurer, Santam’s appeal and upheld the Western Cape High Court’s finding in favour of Ma-Afrika Hotels (MAH) and Stellenbosch Kitchen (SBK) in the final stretch of the battle to hold Santam liable for COVID-19 Business Interruption (BI) claims in the tourism and hospitality industry. 

The decision means that Santam is obligated to pay Ma-Afrika Hotels and Stellenbosch Kitchen for the full 18-month period of its policies. 

André Pieterse, Chairman/CEO of MAH, said:  "We are most grateful to the honourable judges of the SCA, since originally, Santam had argued that it had no obligation in terms of the policy. However, following the judgment in the Cape High Court in November 2020, Santam acknowledged its liability but argued that it was only liable for three months despite the full bench of the Western Cape High Court having rejected their argument." 

Ryan Woolley, CEO of Insurance Claims Africa (ICA) – which represents over 850 claimants in their ongoing fight to receive final payments from insurers – highlighted that the court’s decision in this matter was crucial for thousands of Santam’s Hospitality & Leisure division’s Business Interruption policyholders.

He said the behaviour of insurers throughout the debacle has been a travesty. “In essence, they chose to abandon their customers in their darkest time of need. This has impacted not only the reputations of short-term insurance companies but also on insurance as an overall category. Their Stalingrad strategy of deny, delay and defend has eroded the public’s trust in insurance and we anticipate that it will take significant effort, commitment and time to restore customers' faith in the sector.”

‘Bittersweet moment’

SATIB Executive Head, Dewald Cillie, pointed out that although the company had not managed to study the judgement in full as yet, the ruling was very welcome news for all SATIB customers with a similar Business Interruption policy wording to Ma-Afrika.

He said the ruling brought both clarity and certainty in terms of the finalisation of claims, but also closure to what has been a frustrating and protracted process.

“It’s a bittersweet moment, because we know that it has been (and continues to be) a long, hard road for many in the tourism sector. We’re satisfied with the judgement, pleased to receive clarity, and relieved to see an end to what has been an extraordinary 18 months,” commented Cillie.

The majority of SATIB’s clients have been impacted by the COVID-19 pandemic, initial shutdown, subsequent waves and rolling lockdowns. Many have BI policy extensions in place. So much so that the company immediately set up a COVID Crisis Team and Hotline to deal with BI-related queries and claims.

“As a specialist broker in the tourism and leisure industry we have seen the economic impact first hand,” said Cillie. “Uncertainty and delays around the processing of BI claims exacerbated an already challenging situation and added to our clients’ mental load.

“As such, SATIB initiated the concept of interim relief payments. We’ve worked closely with loss adjustors, fellow brokers and insurers to expedite those payments; worked strategically with Insurance Claims Africa to ensure a beneficial outcome for our mutual clients; and held weekly meetings with insurers throughout the process to monitor progress.”

Cillie pointed out that now that the SCA had made a final decision on the indemnity period, for SATIB clients with similar contingent business interruption (CBI) extensions in their policies to Ma-Afrika and the Stellenbosch Kitchen, the full indemnity period will be considered, and the claims adjusted and quantified accordingly.

“Our first priority has always been to ensure claims are processed quickly and efficiently, are prioritised, and have the best possible outcome for our clients,” said Cillie. “Today is no different. We’ll be sitting with insurers and loss adjustors as soon as possible to plot the way forward. This includes next steps and timelines.”

Many hospitality businesses ‘could not hold on’

Rosemary Anderson, FEDHASA Chairperson, also welcomed the ruling, adding that the hospitality association was saddened by the number of companies that could not hold on any longer and were forced to close because insurers did not pay out their business interruption cover when they should have.  

“The very term ‘business interruption cover’ means you will be paid our while there is interruption. Santam and others like them did not honour this and they are very unlikely to be ever forgiven for the arrogant, cruel and damaging stance they took which caused the loss of so many livelihoods and entrepreneurs’ life savings.  

“This is especially heartless since at Santam’s AGM in July 2020 they assured stakeholders that, should they have to pay out on business interruption, they will be fine.”

Santam accepts ruling

Santam has agreed that judgement has brought legal clarity and finality on the interpretation and application of certain contingent business interruption (CBI) policies and has committed to concluding all BI claims payments as soon as possible.

“We recognise that COVID-19 has had a devastating effect on the economy and, in particular, on businesses. We also understand that our clients were affected by the process of attaining legal certainty on this one remaining BI matter. We are, however, very pleased that this judgment allows us to proceed to finalise all impacted CBI claims as soon as possible in line with the ruling of the SCA,” said Santam Group CEO, Lizé Lambrechts.

A statement from Santam says the judgment affects less than a third of the 3 200 notified BI claims, specifically some policyholders in the Hospitality & Leisure division of Santam.

Lambrechts noted that COVID-19 was a once-in-a-lifetime event that affected the entire population and economy, which also raised key challenges for non-life insurers, regulators, intermediaries and reinsurers globally. “We therefore had to consult widely on how our policies would respond to a pandemic,” she said.

“While doing this we also recognised that we needed to respond to immediate needs. We provided significant premium relief and other support to clients totalling R400 million (€23.2m) right at the outset.

“Getting legal clarity in the face of uncertainty about some policies was essential so that Santam could respond to and balance the interests of the full spectrum of clients and other stakeholders.”

Lambrechts said Santam had already put measures in place to ensure that the wording of its business interruption policies was as clear as possible to avoid uncertainty about cover.

“Our business has a proud 103-year history of being client-centric. We will continue to work hard to strengthen our bonds with our clients, intermediaries, and all other stakeholders in the industry to ensure that clients recover quickly from the devastating effects of the pandemic,” she added.