Hospitality industry is taking on insurers for non-payment of Covid claims

Businesses operating in the tourism and hospitality sector are preparing to take on South Africa’s big insurance companies because they say they are are refusing claims for loss of business caused by the lockdown.

The claimants operate the likes of guest houses, restaurants, hotels and lodgings. They allege that they have insured themselves against business interruption, and in some instances have specific cover related to infectious diseases.

Insurers say disease and lockdown not the same

But, says a loss adjustor who is representing over 400 claimants in the tourism and hospitality sector, insurers are trying to differentiate between COVID-19 as a notifiable disease and the government’s lockdown restrictions which have caused their clients to lose customers.

The former, it seems, may be paid out if a policy covers business interruption due to notifiable infectious diseases, which is common clause in hospitality sector policies. However, the insurers say lockdown losses are due to government action and therefore not covered.

In other instances, there have been reports of insurers also denying business interruption claims as they define ‘interruption’ as being due to a physical event such as fire or flood.

Two clients head to court this coming week

On Monday 15 June, News 24 reports, two Santam clients will bring a potentially precedent-setting case before the Western Cape High Court in an effort to force the insurer to pay COVID-19 related claims for their hotels and restaurants.

“A company which owns hotels and guest houses in Cape Town and Stellenbosch, and another one which owns several restaurants, plan to submit an urgent application to the High Court on Monday as Santam has rejected four of their business interruption claims,” News 24 said.

“In the documents that are due to be filled in the High Court on Monday, Santam clients detail that between 11 and 26 March, one of the hotels had already lost R5.1-million as clients cancelled reservations. The affidavits show that this is the only claim that Santam has accepted. Any losses from 27 March when the lockdown began are excluded.”

In a written response to News 24, Santam said: “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.”

The company added that it was never its intention to provide cover for widespread pandemics or a national lockdown.

Compromise is sought by 400 other claimants

Meanwhile, in a related matter, Insurance Claims Africa chief executive Ryan Woolley has told Cape Talk that the consultancy is ready to act on behalf of around 400 claimants in tourism and hospitality. He is hoping, though, that the dispute can be settled through compromise rather than expensive litigation.

“The tourism sector is facing a severe crisis with a lot of insurance companies turning their backs on the policies and reneging on the contracts, saying we were happy to take the premiums but we’re not going to pay your claims,” he said in an interview with The Money Show.

“Insurance has basically designed a product specific to the tourism industry that gives them extensions to their business interruption policy – one of them a notifiable disease – something that Covid-19 qualifies as…”

“What the insurance [sector] is now trying to do is cleverly sidestepping the issue, saying Covid-19 is not causing the losses – it is the government lockdown,” Woolley explained.



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