Insurers told to pay Covid-19 claims
• Lockdown ‘no excuse’ to bail out
In a victory for hundreds of small businesses facing ruin because of Covid-19 and the resulting lockdown, SA’s financial services regulator has come out strongly against insurers that refuse to pay out on claims caused by losses resulting from the pandemic.
The Financial Sector Conduct Authority (FSCA) says it will take action against short-term insurers that continue to reject claims under business interruption policies on the ground that losses were caused by the national lockdown and not the infectious or contagious notifiable disease covered by the policies. The companies including divisions of heavyweights such as Sanlam, face claims of about R4bn from more than 500 businesses in the tourism and hospitality sector for the loss of business.
A Cape Town restaurant, Cafe Chameleon, has already won a case in the Western Cape High Court, which ordered insurer Guardrisk to compensate it for losses incurred during the lockdown.
The FSCA said on Thursday that the judgment in this case accorded with its own views.
Insurers that face legal action under these policies include Santam, Hollard, Bryte, HIC and Monitor — both in the Guardrisk stable — Thatch Risk Acceptances, Old Mutual Insure and Old Mutual’s One Insure.
Santam has indicated it intends to oppose a case brought by a hotel group in the Western Cape High Court, insisting that its contingent business interruption policies do not cover pandemics.
The FSCA said in a statement that it is “concerned about the
behaviour of some insurers who are deliberately avoiding paying business interruption claims where no grounds exist.
“The national lockdown cannot be used by any insurer as grounds to reject a claim. Such conduct goes against the principles of treating customers fairly … The FSCA has communicated this view to insurers and will take action against those that do not treat their customers fairly.”
The FSCA has warned insurers that it may issue specific directives to any insurer that is seen to be non-compliant.
“Based on the information received and analysed by the FSCA to date, the FSCA found that, though it could not find evidence that the national lockdown could be a trigger for a valid business interruption insurance cover claim, policyholders are able to claim in instances where they can show that they have satisfied the requirements of their specific policy, whether it was before, during or after the lockdown.”
This meant that “the national lockdown cannot be used by any insurer as a ground” to reject a claim. If a policyholder can prove that it suffered a loss … as a result of the contagious/infectious disease in the area specified in the radius clause, and its business was interrupted or interfered with as a result of measures taken as a consequence of the contagious/infectious disease, including the national lockdown, then the policyholder has a valid claim,” the FSCA said.
The regulator said it had continuously reminded the insurance industry that Covid-19 entered the country and spread prior to the declaration of the national lockdown.
Insurance Claims Africa, a specialist public loss adjustment firm representing 500 businesses in SA’s tourism and hospitality sector, welcomed the ruling, which it said rejected the insurers’ interpretation that the government’s lockdown, and not the Covid-19 pandemic, caused the significant losses faced by tourism and hospitality industry.
“FSCA’s statement unequivocally rules out this interpretation of these policies,” its CEO Ryan Woolley said. “Nonetheless, we still invite the insurers to talk to us about a sensible compromise settlement.”