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Court rules insurers need to cough-up for hospitality sector claims

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Insurance firms which had refused to pay out companies, claiming for business interruption due to the Covid-19 lockdown, were recently dealt a blow

Insurance firms which had refused to pay out companies, claiming for business interruption due to the Covid-19 lockdown, were recently dealt a blow. Photographer: Armand Hough/African News Agency(ANA)

Cape Town – Insurance firms which had refused to pay out companies, claiming for business interruption due to the Covid-19 lockdown, were recently dealt a blow when a high court judgment compelled them to pay up.

There is currently a dispute between the hospitality sector and insurance companies over whether claims for losses during lockdown should be paid out.

Insurance Claims chief executive Ryan Woolley said: “Insurers, in rejecting their customers’ claims, have alleged that government regulations in respect of the lockdown are the cause of the loss, and not Covid-19.

“It is clear that without Covid-19 there would be no lockdown, so to attempt to separate the two is nothing short of disingenuous,” he said.

The tourism and hospitality sector has been severely affected since the start of lockdown in March.

A restaurant in Plattekloof, Cafe Chameleon, brought forward an urgent application as it was in financial distress. It said in court papers that it was unable to afford its monthly wage bill of R165000 in full to pay its staff in full.

The owner paid as much as 30% of the salaries of 16 employees in April after the Unemployment Insurance Fund made payment on account of only 25 employees in terms of the Covid-19 Ters.

At the core of the insurers’ argument was that the business interruption was not caused by the pandemic, but by government’s lockdown regulations.

Guardrisk argued that there was no causal link between the lockdown regulations and the Infectious Disease Extension (IDE) and therefore Cafe Chameleon’s loss, if any, was not covered under the IDE clause in the policy.

“While there is no doubt that this is precedent setting, we expect the judgment to be appealed so it is still a long way from payment,” Woolley said.

Santam had rejected a business interruption settlement proposal from more than 400 tourism and hospitality operators.

“Santam understands the financial distress on the businesses and individuals impacted by the national lockdown and has contributed significant funds towards financial relief during this crisis. Notwithstanding this, Santam can only commit to paying claims in line with its policy provisions,” it said yesterday.

OUTsurance head of client relations Natasha Kawulesar said it has settled 135 business interruption claims. “The payments occur monthly until the business has reached its pre-incident turnover or until the indemnity period ends, whichever occurs first.”

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