According to a Bloomberg article, a Cape Town court has ordered Santam to pay out Business Interruption (BI) claims to two South African hospitality companies.
This could bring the potential to other South African insurers to cover losses suffered because of the coronavirus pandemic.
The court has approached the BI case just as the UK Financial Conduct Authority did earlier in the year.
In settling BI claims as a result of pandemic lockdown restrictions, the Tuesday judgement ruled Santam to pay Ma-Afrika Hotels and Stellenbosch Kitchen for losses for an 18-month period.
The decision comes as another South Africa insurer, Guardrisk, appeals a ruling made against it in a similar matter, and may be used by other insurers in the country to finalize their treatment of virus-related business-interruption claims.
Other local insurers had said a global pandemic is not an insurable event which resulted in rejected claims, however some companies have offered a relief to clients whilst others have entered settlement agreements.
South Africa’s largest short-term insurer Santam, which offered relief for business interruptions to some clients of 1 billion rand ($65 million), said it will assess whether to pay a dividend upon the resolution of the case.
The company is studying the judgment and will discuss its implications with stakeholders, including reinsurers, before deciding on a course of action, it said in an emailed statement.
South African Insurers Bow to Pressure on Covid-19 Compensation
Insurance Claims Africa, the specialist claims-preparing company that worked with Ma-Afrika Hotels and Stellenbosch Kitchen, called on other insurers still blocking claims to pay out customers.
Ryan Woolley, ICA chief executive officer told Bloomberg: “We all know that this was a test case, not just for Santam but for all insurers refusing to pay these claim.
“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.”