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The hospitality industry has been embroiled in an intractable battle with its insurers over whether its business interruption coverage was valid to cover them for losses incurred under the lockdown. A recent court ruling provides vital clarity on the debate.
TThe Western Cape Superior Court ruled in favor of Ma-Afrika Hotels and Stellenbosch Kitchen in their case against the short-term insurance company Santam, in what is seen as a victory for all tourism and hospitality companies with pending disruption claims of the business.
The sentencing of Presiding Judge Patricia Goliath and the Honorable Justices Cloete and Matame was delivered on Tuesday afternoon. The court ruled in favor of Ma-Afrika, stating that Santam was responsible for paying all of the business interruption losses and the cost of the case.
Restaurants, hostels and hotels have been locked in a intractable dispute with the insurance industry on the validity of their business interruption claims that they presented after the government’s imposition of a strict blockade in March. The closure has continued in various forms over the past seven months and restaurants have suffered heavy losses, many closing and downsizing along the way.
Almost all insurers, with the exception of Outsurance, which is a small player in this space, disputed liability, while policyholders, supported by the public claims adjuster ICA, argued that the insurance coverage was valid, which which generated widespread concern about the lack of clarity and certainty.
There have been attempts at clarity. In July, the Financial Services Regulatory Authority intervened in the matter and instructed insurers to pay the claims. Also in July, Judge Andre le Grange ruled that the Covid-19 outbreak was the legal and factual cause of the loss of Cafe Chameleon as a result of its business disruption. He instructed Guardrisk to pay the applicant’s business interruption claim.
However, the insurers weren’t convinced and Guardrisk appealed the case. The appeal will be heard on November 23 in the Supreme Court of Appeals.
This case brings a vital certainty.
“We are grateful for the court’s decision in our favor. We are grateful to our legal team, led by Adv Jeremy Gauntlett, and the support of Ryan Woolley and the clients represented by ICA, ”says André Pieterse, President and CEO of Ma-Afrika Hotel Group. “This result will go a long way in enabling us and others in the tourism and hospitality sector to weather the ongoing Covid-19 storm.”
It points out that the payments for provisional measures agreed by Santam and other insurers before this ruling, and which were received in August 2020, allowed the Ma-Afrika group to retain its entire staff of 210 people with more than 1,000 direct. dependents.
The decision has significant cost implications for the insurance industry and its underwriters and it remains to be seen whether it will be appealed.
“Santam has consistently said that he requires legal certainty to meet his clients’ claims, and most other insurers have followed suit. In our opinion, today’s judgment from a plenary session of the Western Cape Supreme Court provides the necessary legal certainty to finalize all claims related to business disruption caused by the pandemic, ”says Ryan Woolley, CEO of ICA, who represents more than 750 companies in the tourism and hotel sector in their battle to get the big insurers to pay these claims.
He adds: “The Ma-Afrika judgment has come in time to provide the SCA with further guidance from respected Cape High Court judges. This is a matter of national importance and the judgment reiterates the need to protect the consumer from Insurers that try to change the terms of the contract after the loss ”.
The tourism and hospitality sector supports more than 740,000 direct jobs and 1.5 million indirect jobs and contributes 8.6% to the South African economy. It is also the lifeblood for many micro and small businesses creating massive employment opportunities for men, women and youth across the country.
“We all know that this was a test case, not just for Santam but for all the insurers that refused to pay these claims. By quickly resolving valid claims, they have the opportunity to contribute to the survival of companies in this critical sector and the preservation of thousands of jobs, ”says Woolley.
The ICA and Ma-Afrika Hotels legal team is led by advocates Jeremy Gauntlett QC SC, Mike van der Nest SC, Sean Rosenberg SC, Guy Elliott SC, and Porchia Long and Jason Mitchell. They are instructed by attorneys Anel Bestbier of Thomson Wilks and David Bayliss. DM / BM
