Home South African Court to hear “watershed” case on hospitality sector insurance claims

Court to hear “watershed” case on hospitality sector insurance claims


Judgment could have “far-reaching implications across the entire insurance industry”

South African restaurants have reopened with restrictions after being forced to shut down when the government imposed the Covid-19 lockdown from March 27. File picture: Courtney Africa, African News Agency (ANA)

THE WESTERN Cape High Court is set to hear a watershed case on Tuesday in which companies in the hospitality industry are challenging the rejection of insurance claims relating to losses incurred due to the Covid-19 pandemic.

In a statement on Monday, Insurance Claims Africa (ICA) and hospitality group Ma-Afrika Hotels said they had joined forces to litigate against financial services company Santam over rejected claims.

Ma-Afrika Hotels and restaurant company Stellenbosch Kitchen are joint applicants in the matter, which will be heard by a full bench led by Deputy Judge President Patricia Goliath.

ICA is a public loss adjustment company representing over 700 businesses in the tourism and hospitality sector in their battle to get large insurers to pay out such claims.

“We believe this is a watershed test case in which the judgment will have far-reaching implications across the entire insurance industry. It’s also a critical case for all claimants in the tourism and hospitality sector, for whom the failure of their insurers to pay their legitimate claims has had a devastating impact on their businesses and their employees,” ICA chief executive officer Ryan Woolley said.

“While it’s Ma-Afrika Hotels in court tomorrow, the truth is that they are there on behalf of all tourism businesses who bought business interruption insurance that included cover for notifiable infectious and contagious diseases.”

“It’s also not only Santam in the dock tomorrow but also a rogue’s gallery of insurance companies, which includes Old Mutual Insurance, Hollard, GuardRisk, Bryte, Thatch, F&I, TRA, Lombard, AIG, CHUBB and Monitor. Like Santam, all these companies have rejected these claims and are waiting to see what the court decides,” Woolley added.

In July, South Africa’s Financial Sector Conduct Authority said it was concerned that some insurers were using the country’s lockdown in response to Covid-19, which initially grounded all but essential economic activity from March 27, to avoid paying business interruption claims.

It said the lockdown could not be used by insurers as grounds to reject claims.

On August 13 Santam, the largest short-term insurer in the country, said it had since August 5 paid out R506 million of the R1 billion allocated for urgent relief to 1 315 policyholders in the hospitality, leisure and non-essential retail services industries who had contingent business interruption extension in their policy cover.

On Monday Ma-Afrika Hotels chief operating officer Elna du Toit accused Santam and other large insurers of having lost their “moral compass, their credibility and their decency” over claims that have been rejected.

“It’s a travesty that we are having to go to court to fight for what is due to us,” Du Toit said.

“If there’s one thing that Covid-19 has shown the tourism and hospitality sector, it’s that when it comes to insurers, they will promise you the earth to get your premiums, but will let you down when you need them most.”

The tourism and hospitality sector sustains over 740 000 direct and 1.5 million indirect jobs, contributing billions of rand to the South African economy.

Woolley said the decision taken by the court from the case would be precedent setting and “will reverberate through the insurance industry for years to come”.

– African News Agency (ANA)