High Court rules in favour of Ma-Afrika in business interruption case against Santam
Yesterday the Western Cape High Court handed down its judgement in favour of Ma-Afrika Hotels and Stellenbosch Kitchen against Santam. This comes after weeks of deliberation following the 1 September hearing in front of a full bench made up of three senior judges: Deputy Judge President Patricia Goliath, Judge BP Mantame and Judge JL Cloete.
This case sought to obtain legal certainty on the matters of business interruption policy wording and interpretation, and crucially, whether or not the applicants’ business interruption policy covers the government lockdown.
The judgement finds in favour of the applicants on each of the key arguments relating to wording, causation and insured peril, the trends clause and the indemnity period within the specific policy. Therefore, the court has directed Santam to cover the full business interruption losses suffered by Ma-Afrika and Stellenbosch Kitchen as a result of the local occurrence of COVID-19 and the nationwide government lockdown, for the entire duration of the indemnity period of 18 months.
Closely followed by much of the tourism and hospitality industry and the short-term insurance industry, this judgement in favour of the policyholders holds influence in South Africa as well as globally where it is sure to make news as similar litigation unfolds in the UK, the USA and elsewhere.
Indeed, the timing of this is important considering the similar matters underway at the moment. The Financial Conduct Authority (FCA) is in the midst of an appeal in the UK’s Supreme Court this week after the High Court found in favour of policyholders; and the Café Chameleon v Guardrisk matter is in the Supreme Court of Appeal (SCA) this coming Monday, 23 November, also off the back of a judgement in favour of the policyholder.
Despite Santam and other insurers extending relief payments back in August and September, that proved critical to many ailing tourism and hospitality businesses, insurers have continued to seek the unimpeachable legal certainty that will prompt their reinsurers to support the paying of claims.
However, it’s not yet clear whether or not Santam will seek to appeal this judgement, and how other insurers will respond to the calls for this judgment to set precedent throughout the industry. Before anything else, Santam will be required to engage with its reinsurers who may insist on an appeal.
We know there are many questions about what this judgement means for those insured by Santam as well as by other insurers with similar wording in their business interruption policies. Likewise, what this means if you have accepted a relief payment or settlement offer from your insurer. It was made clear when relief payments were offered that they were not on condition of a positive court outcome, but that if the court (and possible appeal process) was in favour of policyholders, then the relief payments would be considered part payment of the finalised claim amount.
Well aware of these pressing questions from clients, Santam is preparing a detailed response to the judgement with answers pertaining to the next steps which we will share with you as soon as it’s received. Santam will also hold a webinar for intermediary partners who have clients with CBI policy extensions to help further unpack the implications of this judgement. Planned for later next week, our team will be in attendance and prepared to quickly disseminate all pertinent information and provide guidance where needed.
We’re closely monitoring all developments in this matter, including the FCA and Café Chameleon appeals. And we’re busy analysing the judgment with our legal team and rallying our brokers to ensure that your questions are answered as soon as possible. For those who have made COVID-19 business interruption claims, your Accounts Executive will be in touch shortly to provide more clarity.
The full judgement can be viewed here.