Old Mutual Insure has lost a legal case against a Cape Town-based retailer of luxury travel goods company that took it to court after it refused its business interruption claim following the closure of its flagship store at the V&A Waterfront and other outlets due to Covid-19 pandemic and subsequent lockdown.
The Western Cape High Court on Wednesday ruled that Old Mutual Insure must indemnify Interfax for losses caused by the pandemic and its associated lockdown up to the maximum insured amount of R17.6m. Interfax, which operates Luggage Warehouse stores at the V&A Waterfront as well as in Kenilworth and Bellville, argued that the pandemic and the regulatory response to it had been “catastrophic” to its business and 40 employees.
The court said it was “with regret” that it had to reject an application by Interfax to be awarded an interim payment of R4.84m for April, May and June 2020, as well as a portion of March, as this was not provided for in the policy. Nevertheless, it ordered Old Mutual Insure to pay the applicants costs.
As with recent cases lost by fellow insurers, Santam and Guardrisk, Old Mutual Insure argued that the wording of the policy required that a contagious or infectious disease occur only within the 50km radius specified in the contract.
Furthermore, its lawyers argued that there must be a direct link between a person suffering from the disease and the resultant business interruption stemming from a response by authorities within the specified radius.
The court considered recent judgments in similar cases overseas, as well as legal precedent established by local cases, to arrive at the conclusion that the two parties must have envisaged that regulatory steps taken in response to the infectious disease may extend beyond a local outbreak. This was reflected in the wording of a provision within the policy, which referred to authorities imposing restrictions on the local area in accordance with “local, regional, municipal or national law”.
The judgment made specific mention of the recent case between Guardrisk and Café Chameleon in which the court found “a clear nexus” between the Covid-19 pandemic and subsequent regulations that resulted in business interruption.
In a separate ruling on November 20, the court also found against Guardrisk, which is owned by JSE-listed Momentum Metropolitan Holdings, ordering it to compensate Fat Cactus restaurants for losses stemming from Covid-19 and the resultant lockdown.
In that judgment, which included a cost order against Guardrisk, the court referred to a similar case between Santam and Ma-Afrika Hotels where it was found that Covid-19 and the government’s response to it were part of the same insured peril.
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