Guardrisk, a subsidiary of Momentum Metropolitan Holdings, has defended its record in settling contingent business interruption claims from clients whose businesses have been affected by Covid-19.
The company’s response comes just two days after Insurance Claims Africa (ICA), the public loss adjuster assisting policyholders who claim their insurers are resisting settling Covid-19 business interruption claims, accused the short-term insurance industry on Tuesday of hiding behind lawyers and bureaucratic processes to delay settlement. ICA also hinted that it may launch “ground-breaking litigation” against the short-term insurance industry for damages to clients’ businesses caused by insurers’ alleged resistance to timeous claims settlement.
Nevertheless, Guardrisk says it has finalised 530 of the 670 claims it received for Covid-related business interruption losses since the imposition of the first hard lockdown on March 27 2020, which equates to a settlement rate of just over 79%. The insurer says these settlement payments have totalled R415.5m, which would imply an average of R783,962 for each of the 530 claims settled thus far, though each individual settlement would necessarily differ according to each client’s policy agreement.
“Guardrisk has thus settled [almost] 80% of losses outright and a higher percentage if one includes those where we have made interim payments to assist clients where possible,” Walter Cronje, Guardrisk’s executive head of general insurance, told Business Day.
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 must indemnify the restaurant for pandemic-related losses. Guardrisk appealed the decision, but in a landmark ruling published in December 2020 the Supreme Court of Appeal (SCA) dismissed the appeal with costs, ordering the insurer to compensate Café Chameleon for business interruption losses stemming from Covid-19 and the ensuing lockdown.
The ruling followed a string of court losses by insurers that initially refused to pay claims for Covid-related losses and set a legal precedent that potentially put insurance companies on the hook for billions of rand in business interruption payouts.
Guardrisk had argued in the Café Chameleon case that the infectious disease clause in its policy agreement with the restaurant only covered a public health response to local occurrences of a disease within a 50km radius of its premises rather than a worldwide pandemic. The insurer also argued that the government’s response to the pandemic was what had caused the losses to Café Chameleon rather than Covid-19 and that this did not fall within the ambit of the infectious disease clause in its policy.
However, the SCA found that a notifiable disease almost always carries the risk of a government response and therefore ruled that the pandemic and subsequent lockdowns were part and parcel of the same insured peril. The SCA’s decision was fortified by several other court losses involving insurers including Santam and Ma-Afrika Hotels, Old Mutual and Interfax, and another Guardrisk court loss against Fat Cactus Restaurants.
Guardrisk told Business Day on Thursday that of the 530 claims it had settled in relation to Covid-19 business interruption losses, 523 were from the hospitality industry, one of the sectors hardest hit by government’s lockdown regulations. These 523 finalised claims amounted to R404.8m.
The remaining 140 non-finalised claims of the total 670 Covid-19-related business interruption claims received by Guardrisk had either received interim payments or clients were still in the process of formulating losses. The company said it still had 91 outstanding claims with an estimated value of R98.7m, though a substantial portion of these (R56m) had indemnity periods of 18 months or longer and had not yet run their course.
“Less than 10 of the outstanding claims have attorneys involved in dealing with clarifications on the quantum of the claims,” said Cronje. “Our view is that the attorneys, in many instances, add substantial value in streamlining discussions to fast track the process with adjusters and clients where further clarification is required.”
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