South African insurers Guardrisk and Santam have finally committed to pay out business interruption insurance claims arising from the pandemic. This follows three separate court cases – one against Santam by Ma-Afrika Hotels and The Stellenbosch Kitchen, and two against Guardrisk by Cafe Chameleon and the Fat Cactus respectively – which found the insurance companies in breach of their contracts by withholding payment.
The insurance companies had argued that the national lockdowns were not covered by their business interruption policies. Guardrisk appealed the ruling in the Cafe Chameleon case, but the appeal was dismissed.
“A swift pay-out could literally save their businesses and jobs.”
Rosemary Anderson, FEDHASA (Federated Hospitality Association of South Africa) National Chair, believes the insurance companies have suffered great reputational damage by fighting these claims. She says, “The whole purpose of insurance is to be there when one has a problem and these Insurers did the exact opposite, failing to help those in financial distress at their time of business interruption which was the whole purpose of paying Business Interruption cover in the first place. We’ve been given the run-around for nine months.”
She believes that if insurers pay out in full, an estimated R6-billion will be injected into their client’s businesses; “A swift pay-out could literally save their businesses and jobs.”
One third of guesthouses on the Garden Route lost at least 50% of their bookings for the festive season, with some reporting 80 to 100% loss of revenue for December and January.
The timing could not be better. The second wave of Covid-19 infections and subsequent adjustments to South Africa’s lockdown regulations last month has further harmed the hospitality industry’s recovery efforts. NightsBridge, an online accommodation booking system provider, ran a survey after President Cyril Ramaphosa’s address on 14 December 2020 where he announced that beaches would be closed in hotspot areas to contain the spread of the virus. The survey found that one third of guesthouses on the Garden Route (an identified hotspot) lost at least 50% of their bookings for the festive season, with some reporting 80 to 100% loss of revenue for December and January.
This was prior to the President’s subsequent address on 28 December 2020 where more hotspots were identified, alcohol sales were banned and a stricter curfew was introduced – among other restrictions.
Santam has thus far paid out “more than R1bn in interim relief to nearly 2 500 small and medium-sized businesses in the hospitality, leisure and non-essential retail services industries that have CBI cover in the policies” reports the Sunday Times. These payments will be offset against valid claims.
Meanwhile Guardrisk paid out R293 million in 383 commercial settlements last year – which means these clients will no longer be able to claim business interruption insurance. A further 130 claims are pending re-assessment.
Empty beach photo by Drone Dad 81
