Johannesburg- Santam says it has accepted the decision made by the Supreme Court of Appeal (SCA) that has brought legal clarity and finality on the interpretation and application of certain contingent business interruption (CBI) policies.
Santam had approached the Bloemfontein court to challenge the 18-month indemnity period, saying their policy only covered clients’ losses for three months.
The company is now forced to pay Ma-Afrika R105.5 million and The Stellenbosch Kitchen R16.9 million for revenue loss.
“We recognize that Covid-19 has had a devastating effect on the economy and in particular on businesses. We also understand that our clients were affected by the process of attaining legal certainty on this one remaining CBI matter. We are however very pleased that this judgment allows us to proceed to finalize all impacted CBI claims as soon as possible in line with the ruling of the SCA,” said Santam Group CEO Lizé Lambrechts.
In the case between Santam and Ma-Afrika Hotels and Stellenbosch Kitchen, the SCA ruled that the longer 18-month indemnity period referred to in the main business interruption section of Ma-Afrika’s policy that deals with physical damage also applies to the extension of the contagious and infectious disease of the contract which Santam argued was three months.
The judgment affects less than a third of the 3 200 notified CBI claims, specifically some policyholders in the Hospitality & Leisure (H&L) division of Santam.
The insurer has already made significant progress in processing CBI claims and has so far paid more than R2.1-billion, including more than R1.1-billion since January 2021.
“Today’s judgment provides the clarity and certainty we and our clients have been looking for. At the same time, we will take positive lessons from the process.”
Lambrechts noted that Covid-19 was a once-in-a-lifetime event that affected the entire population and economy which also raised key challenges for non-life insurers, regulators, intermediaries, and reinsurers globally.
“We, therefore, had to consult widely on how our policies would respond to a pandemic,” she said.
“While doing this we also recognized that we needed to respond to immediate needs. We provided significant premium relief and other support to clients totaling R400-million right at the outset,” she said.
“Getting legal clarity in the face of uncertainty about some policies was essential so that Santam could respond to and balance the interests of the full spectrum of clients and other stakeholders.”
“In order to reduce the strain on clients, we paid R1-billion in interim relief to about 2 500 businesses in August 2020, which was done over a few weeks.
The payments were received very positively by clients and intermediaries and were in many instances higher than their final assessed claims,” said Lambrechts.
Santam has already put measures in place to ensure that the wording of its business interruption policies is as clear as possible to avoid uncertainty about the cover.
“Our business has a proud 103-year history of being client-centric. We will continue to work hard to strengthen our bonds with our clients, intermediaries, and all other stakeholders in the industry to ensure that clients recover quickly from the devastating effects of the pandemic,” added Lambrechts.
“We look forward to concluding all CBI claims payments as soon as possible and to continue implementing our FutureFit strategy, underpinned by our brand promise of Insurance Good and Proper,” Lambrechts concluded.
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