Santam defends its stance on business interruption claim settlements

Paying three-month claims while inviting engagements on longer periods pending court challenge

Wendy Knowler Consumer journalist
Santam's decision to limit its payment of business interruption claims to just three months of losses as a 'full and final settlement' of claims has been labelled 'unconscionable' by the CEO of Insurance Claims Africa. File image
Santam's decision to limit its payment of business interruption claims to just three months of losses as a 'full and final settlement' of claims has been labelled 'unconscionable' by the CEO of Insurance Claims Africa. File image
Image: REUTERS/MIKE HUTCHINGS

Santam has come under fire for limiting its payment of business interruption claims to just three months of losses as a “full and final settlement” of claims.

Ryan Woolley, CEO of specialist public loss adjuster Insurance Claims Africa (ICA) - which represents scores of hotels and restaurants which had contagious diseases specified in their business interruption policies - called Santam’s decision “unconscionable”, given that many policyholders had indemnity periods of six, 12 and 18 months stipulated in their policies.

The indemnity period is the maximum number of months for which a policyholder can claim losses in a business interruption policy.

“The problem for Santam is that they have a judgment against them in the Ma-Afrika [high court] matter, which orders the insurer to pay for the full indemnity period of 18 months,” Woolley said.

“This should not be ignored. The only way for them to treat their customers fairly is to offer an interim payment of three months, and leave the balance to be dealt with after the appeal is heard by Supreme Court of Appeal (SCA).

“Offering three months in full and final settlement, and forcing their customers to sue them for the balance, is grossly unfair and unconscionable. It suggests it is no longer legal certainty that Santam seeks, but that it is in fact trying to take advantage of vulnerable clients who are desperate for funding.”

Last week Santam announced that it would start assessing the business interruption claims of clients whose claims were impacted by last month’s judgment in the Western Cape high court in the case between Santam and Ma-Afrika Hotels and The Stellenbosch Kitchen, as well as the judgment of the SCA in the case between Café Chameleon and Guardrisk Limited, including claims the company had previously rejected in the months after the national lockdown in late March 2020.

“The Ma-Afrika judgment resolved 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 there was an occurrence of Covid-19 within the designated radius of the insured premises,” Santam said at the time.

“The SCA decision in the Café Chameleon court case confirmed that approach.”

Guardrisk and Hollard committed to paying their clients’ business interruption claims several weeks ago but Bryte Insurance, Old Mutual Insure and Factory & Industrial have yet to respond to the legal precedents.

Wooley said on Tuesday that while ICA was encouraged by Santam’s acknowledgement that legal certainty had been established, its continued strategy of “delay, deny and defend” had put its customers under “excruciating financial stress”. 

“The real tragedy is that if these businesses are forced to shut down as a result of Santam’s non-payment, their claim against the insurer is extinguished,” he said.

Not so, Santam said on Tuesday.

“Businesses that incurred claimable losses and have gone into liquidation since March 2020 can still claim against their policies with contingent business interruption extensions,” the insurer said.

The short-term insurer, which is SA’s largest, said the Western Cape high court judgment regarding the indemnity period applied only to the Ma-Afrika policy.

The company said: “It does not set legal precedent for the indemnity period for all other policies.

“Santam’s view is that the indemnity period is limited to three months as stated in the Ma-Afrika policy, but the court ruled that, for the Ma-Afrika policy, the indemnity period is 18 months.

“It is Santam’s view that the Western Cape high court erred in its judgment in applying an 18-month indemnity period across the entire policy.”

The insurer said the hospitality and leisure companies’ policies, which are impacted by the recent court rulings and are being processed by Santam, specifically carry three-month indemnity periods.

“It is for this reason Santam is offering full and final settlements in respect of these claims.”

Santam urged businesses impacted by the Ma-Afrika and Café Chameleon judgments “to engage with their intermediaries and provide information required for the assessment of claims”.

The insurer stressed, again, that it had paid R1-billion in interim relief to 2,500 SMEs which had business interruption cover, and several of its competitors had done the same.

“We are the only insurers in the world known to have offered interim relief to clients while awaiting final legal clarity,” Santam said.