The SCA has dismissed an appeal by Santam against a contingent business interruption (CBI) claim verdict, offering certainty to one of the most contentious legal debates in the short-term insurance industry since the start of the Covid-19 pandemic.

It was reported that yesterday’s ruling represents a significant – and final – victory for SA’s battered tourism and hospitality businesses. It appears unlikely that Santam will take the matter to the Constitutional Court which does not generally deal with commercial litigation.

CBI claims related to Covid-19 have emerged as one of the most contentious issues in the short-term insurance industry.

Insurers initially rejected claims on the basis that their policy wording only covered outbreaks of disease within a business premises as opposed to a global pandemic. At the same time, others argued that the lockdown resulted is business losses as opposed to the virus.

The country’s biggest short-term insurer said it welcomed the ‘legal clarity’ the SCA provided and the judgment affected less than a third of the 3 200 CBI claims it had received.

BI claim payments of more than R2.1bn have been made to date, inclusive of the relief payments of R1bn made in August 2020.

The company has claimed from its reinsurance for the claims, and the first payment was made in September 2021.

The appeal was against a November 2020 decision by the Western Cape High Court that it must pay out BI claims to Ma-Afrika Hotels and Stellenbosch Kitchen for the full 18-month period covered in their policies. 

Sanlam argued that its policy wording meant it was only liable to pay out for three months.

But yesterday, the SCA dismissed Santam’s appeal with costs, meaning it would have to pay out Ma-Afrika and Stellenbosch Kitchen in full, reports BusinessLIVE.

The SCA said Santam had ‘twisted and turned’ and ‘changed tack’ in a studious attempt to avoid liability.

 The court also said Santam had engaged in ‘a desperate re-running’ of submissions accepted by foreign courts, notably in the US, where it was argued that business interruption claims for Covid-19 must fail on the basis that such insurance policies had traditionally only contemplated physical damage to businesses.

‘It is, in our view, hardly possible to imagine a more tortured, convoluted and intricate approach to the reading of the policy,’ the SCA said.

Much of the deliberation in the case centred on the interpretation of the wording in Santam’s policy documents as well as which items on a menu of perils had been selected by the insured parties.

However, the SCA found that Santam’s policies were difficult to navigate and that there was a meaningful degree of uncertainty around whether indemnity periods of three months or 18-months applied to certain events.

This meant that the contra proferentem rule, which requires that written documents be construed against the party that drafted them, would apply against Santam and in favour of Ma-Afrika and Stellenbosch Kitchen.

Full BusinessLIVE report

Judgment