Insurance Claims Africa (ICA), the public loss adjuster spearheading the fight against insurers over Covid-19 business interruption claims, has lambasted SA's short-term insurance sector for using lawyers to delay settling claims and has hinted it may launch “groundbreaking litigation” against the sector.
Armed with research on the short-term insurance sector’s finances compiled by independent economist Roelof Botha, ICA held a virtual media conference on Tuesday during which it accused the short-term insurance industry of reaping huge windfalls during the pandemic while refusing to pay out claims to clients whose businesses were devastated by Covid-19. ICA was particularly critical of Santam, saying its reputation had been sullied and that its hospitality and leisure insurance division was “an absolute mess”.
“The gross inequity of the situation is blatantly prejudicial to claimants who are still awaiting settlement more than one year after the start of the pandemic,” said Ryan Woolley, CEO of ICA. “We believe that insurers are ignoring their clients’ extreme financial anguish and are underestimating the level of dissatisfaction and loss of trust from the delays in settlement.”
ICA is representing over 850 claimants in the tourism and hospitality sector who are battling to receive final payments from insurers related to business interruption losses linked to Covid-19 and subsequent lockdowns. Insurers including Santam, Guardrisk and Old Mutual lost a series of court cases in 2020 for initially refusing to pay out claims linked to Covid-19 business interruption.
Insurers used a variety of tactics ranging from arguing their policy wording only covered localised outbreaks of disease within a specific radius of client premises rather than a worldwide pandemic. Some also claimed it was government’s lockdown that hurt businesses and not the pandemic itself.
However, in several landmark rulings against insurers the courts ruled the pandemic and the government’s response to it were part of the same insured peril. Café Chameleon became the first business in SA to win a Covid-19 business interruption case in July 2020 when the high court in Cape Town ruled that Guardrisk, a subsidiary of Momentum Metropolitan Holdings, must indemnify the restaurant for losses linked to the pandemic.
Santam also had to raise its contingent business interruption provisions after the high court ruled against it in November 2020, in a case involving Ma-Afrika Hotels and Stellenbosch Kitchen. A full bench of the court ordered Santam to pay these clients for losses stemming from Covid-19 business interruption for the full policy period of 18 months.
Santam CEO Lizé Lambrechts, who will step down from her role in 2022, told Business Day in March that the company wanted more clarity on the indemnity period, which it wants to limit to three months. The Supreme Court of Appeal is scheduled to hear Santam’s arguments against the Ma-Afrika judgment on August 26.
“There are several thousand clients that are going to be impacted by that judgment,” said Woolley.
Mike Gains, chair of ICA, said Santam’s previous reputation for technical excellence when assessing claims had “slumped into the basement” and accused its board of not taking control of the contingent business interruptions claims controversy.
“They’ve left it in the hands of their attorneys Norton Rose and Clyde & Co who have given them bad advice from the outset,” said Gains. “We only managed to convince Santam to make interim payments less than a month ago.”
Gains cited legislation in the US that allowed for insurance companies to be sued for damages beyond those covered by their policies if their claims payouts were deemed substandard.
“In SA, our insurance companies don’t have to worry about that — they only pay you to the value of the policy and you can’t sue them for damages,” said Gains. “Well there’s a surprise coming. We’re having a look at that.”
Woolley said ICA had sought legal opinion on whether policyholders could seek additional damages beyond those outlined in policies, particularly where they had been caused by delayed or absent claims payouts. He added that it would be “ground-breaking litigation” in SA.
Santam told Business Day that ICA’s statements were inaccurate and that it continued to “expeditiously” settle all valid claims in line with the policy wordings and conditions of its cover.
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