South Africa's largest non-life insurance company Santam says that it has decided to appeal against the judgment of the Western Cape High Court that found the insurer liable to pay clients' claims related to the coronavirus lockdown.
The court case relates to insurance policies with Contingent Business Interruption (CBI) infectious disease extensions sold to Ma-Afrika Hotels and Stellenbosch Kitchen.
Santam says in a statement that it believes that the High Court erred in its judgment on 17 November regarding causation and the insured peril, the trends clause and the indemnity period, and it is therefore important to take the matter to the Supreme Court of Appeal.
The statement reads, “The significance of the CBI matter to the insurance industry and the precedents at stake necessitate continuing to the next stage in the process of obtaining legal finality. We have also discussed the implications of the judgment with our lead reinsurers in arriving at our decision. Our reinsurers are key stakeholders in the insurance value chain as they are in effect insurers to the insurer. They agree with us on the need to obtain legal certainty from a higher court in this matter.”
The Ma-Afrika judgment refers to both the Café Chameleon vs Guardrisk matter as well as the Financial Conduct Authority (FCA) judgments in the United Kingdom. All of these judgments have been taken on appeal with decisions expected late in 2020 or early in 2021.
While awaiting the legal process to be concluded, Santam paid out more than ZAR1bn ($65m) in interim relief to assist nearly 2,500 small and medium sized businesses in the hospitality, leisure and non-essential retail services with CBI cover in the policies. These are considered to be advance payments against any finally determined claims, in the event that the courts ultimately rule in favour of the policyholders. Should the courts rule in favour of Santam, then the amounts paid will be considered relief payments and will not be recovered from policyholders, the insurer says.
In addition to the ZAR1bn relief payment, the company has to date also committed up to ZAR400m in COVID-19 funding to provide relief through premium reductions, premium refunds, support to SMEs in the industry, corporate social responsibility and Government’s Solidarity Fund.
Santam added, “We are also pursuing an expedited appeal process to ensure that we bring this matter to finality as soon as possible.”
Responding to the High Court's decision, Insurance Claims Africa (ICA), which represents more than 750 clients who have had claims rejected, is reassessing the value of their claims based on the court ruling. The value of these claims totals ZAR6-7bn, says ICA which represents around 30% of the market.