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Insurer 'refuses' to pay for coronavirus losses

Altitude Beach faces closure after Santam would not pay for an insurance claim, insisting the business was not covered for lockdown losses.
Altitude Beach faces closure after Santam would not pay for an insurance claim, insisting the business was not covered for lockdown losses.

Altitude Beach in Fourways, Johannesburg, faces possible closure after its insurance company refused to pay out its claim for financial losses suffered during the coronavirus pandemic.

The popular and luxurious spot is one of at least 2,000 companies in the entertainment and hospitality industry that have had their claims rejected by insurance companies.

Most, if not all, of their claims were rejected because the insurance companies, including Santam, said they believed the losses were not due to the pandemic - which they were covered for - but linked to the government-imposed lockdown.

Owner of Altitude Beach Mike Lodder said he would be forced to shut down should his claim not be successful, as he has been using his own money to keep it afloat since the lockdown started in March. He is insured with another company, which could not be reached for comment.

He told Sowetan he was unable to meet his financial obligations for the multimillion-rand business he started in November and would be forced to shut down and lay off the more than 120 staff members.

"We are getting to a stage where, yoh, if they don't help us we're going to have to close it off. We're going to lose, 120–130 jobs there, which feeds how many people? It's ridiculous," Lodder said. "What we're saying [to insurance companies] is don't pay us the full claim, pay us something, let's negotiate, just help us. And it seems they are just not willing to help."

He put in at least R28m to start the business, which gives him monthly returns of between R3m and R9m, but would be forced to close down the business in just eight months.

"There's still a lot of money owed to investors and to the banks. There's still nearly R18m that's owed on that business. Of course this goes up because there are interests and all sorts. I mean, the banks give you payment holidays but those come to an end and they want their money."

He said that if insurance companies were allowed to get away with out-rightly rejecting claims, they would kill the hospitality and entertainment industry that had been hit hard by the lockdown.

Insurance company Santam is facing a litany of lawsuits across the country after also refusing claims on the same basis. After his claim was rejected in April, Duncan Heafield, owner of the 500-seater Bellezar Beach Café in Umhlanga, KwaZulu-Natal, contacted hundreds of other businesses that had suffered the same fate at the hands of the largest insurer, Santam, for a lawsuit.

At least 300 other companies, including Boston Lodge and Restaurants, South Coast Accommodation, and Sunset Beach are taking legal action against Santam.

Santam said it was not in a position to comment as it was not fully aware of the looming legal case, but forwarded Sowetan a statement that detailed that it had received dozens of claims which had to be rejected as the businesses were not covered for such a pandemic.

"What we are seeing is that a number of our policyholders were forced to close their businesses at the start of the national lockdown. The national lockdown is not a peril that is covered by our policies and so they would not be able to make a successful claim for this event. It is a requirement in terms of the policy that the business is directly affected by a case of Covid-19," Santam's statement read.

They all sent the insurance final letters of demand to honour the claims over the weekend, failing which they will approach the court on an urgent basis within the next week.

"We haven't been able to get 10% our normal business back during this period, which has affected, among others, the staff complement of normally 88 people. I've only been able to bring back six staff members during this time," Heafield said.

"In the beginning of this pandemic, we were told by our brokers that we were covered for infectious disease for business interruption and that's in our policies.

"So we put our claim in and Santam repudiated the claim to say that the economic losses we have suffered is not as a result of the Covid disease [but] of the government's intervention. Now those go hand in hand in our books."

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