Covid-19 battle between insurers and hospitality firms moves to appeal court

After two high court defeats for insurers who refused to pay Covid-19 business interruption claims, the arena is moving to the Supreme Court of Appeal.

Guardrisk has challenged a Cape Town high court judgment in June ordering it to compensate Café Chameleon in Plattekloof, Cape Town, for revenue lost as a result of Covid-19 and the lockdown. Its appeal will be heard in Bloemfontein on Monday.

On Tuesday, the Cape Town court ordered Santam to pay two hospitality companies which between them have business interruption cover worth R122m.

The judgment means the insurer must compensate Ma-Afrika Hotels and The Stellenbosch Kitchen for their pandemic-related losses for 18 months.

Ma-Afrika chairperson and CEO André Pieterse said the outcome of the case, in which Santam was also ordered to pay the litigants' costs, “will greatly assist in allowing ourselves and others in the tourism and hospitality sector to weather the ongoing Covid-19 storm”.

He added: “We are hopeful that this decision by the court will terminate the litigation, thereby bringing an end to the insecurity and suffering of many.”

Pieterse said Santam made interim relief payments in August which allowed the company to retain its 210 employees.

Insurance Claims Africa (ICA), which supported Ma-Afrika and Cafe Chameleon in their court actions, said Tuesday's judgment was “a resounding victory for all tourism and hospitality businesses” and called for the “immediate resolution and payment” of claims.

Ryan Woolley, the CEO of ICA - which represents more than 750 hospitality businesses struggling to be paid out - said: “Santam has consistently said that it requires legal certainty in order to honour customers' claims, and most other insurers have followed suit.

"[The judgment] provides the legal certainty required to finalise all claims relating to business interruption caused by the pandemic. The seismic impact of Covid-19, coupled with insurers’ unwillingness to honour their obligations to their customers, has deepened these businesses’ losses, with some unable to ever recover.

“We believe it is now time for the insurance sector to step up and display the ethical leadership that has been missing from their response to this crisis thus far.”

Woolley said the Ma-Afrika judgment was a test case for all insurers. “By settling valid claims expeditiously, they have the opportunity to contribute to the survival of businesses in this critical sector, and to the preservation of thousands of jobs,” he said.

“Failure to do so will ensure they are remembered in history as companies that contributed directly to the demise of thousands of businesses and jobs during the country’s worst economic and social crisis.”

Woolley said the tourism and hospitality sector sustains more than 740,000 direct and 1.5 million indirect jobs, and comprises 8.6% of the economy.

“It is also the lifeblood for many micro and small enterprises creating mass employment opportunities for men, women and youth across the country.”

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