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Santam to assess rejected COVID-19 BI claims

4th January 2021 - Author: Charlie Wood

South African insurer Santam is set to commence the process for assessing claims for policies with contingent business interruption (CBI) extensions.

The claims assessment process applies to policies impacted by the recent judgment in the Western Cape High Court in the case between Santam and hospitality firms Ma-Afrika Hotels and Stellenbosch Kitchen and the judgment of the Supreme Court of Appeal (SCA) in Café Chameleon v Guardris.

In line with the court rulings, this applies to Santam policies written by its Hospitality and Leisure Division (H&L).

The Ma-Afrika judgment resolved that there is cover for business interruption losses caused by Covid-19 itself and generally by the national lockdown and related restrictions imposed by government in response to the pandemic, provided that there was an occurrence of Covid-19 within the designated radius of the insured premises.

Following the Ma-Afrika judgment, Santam increased its net CBI claims provision by R1.7 billion in addition to the R1.3 billion that was raised in June 2020.

Santam says the increase in the provision was mainly due to the Ma-Afrika judgment in favour of the policyholders and the court’s different view regarding the indemnity period applicable to the CBI extension.

Santam’s view is that the indemnity period is limited to three months. The court, however, found that the indemnity period is eighteen months in this particular matter.

Santam respects the decision of the courts and believes that the recent judgments are sufficient to provide legal certainty in terms of the proximate cause of business interruption losses for policies with the same conditions, characteristics and circumstances to the Ma-Afrika and Café Chameleon judgments.

The company will however continue with its application for leave to appeal the Ma-Afrika judgment at the SCA specifically regarding the indemnity period.

The recent Café Chameleon SCA judgment, reportedly does not have a significant impact on Santam’s net CBI provision.

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