South Africa

Court orders insurer to pay losses incurred by restaurant during lockdown

Court orders insurer to pay losses incurred by restaurant during lockdown

Insurance Claims Africa (ICA) has welcomed the judgment of the Western Cape high court in which it compelled insurance company Guardrisk to honour the Covid-19 business interruption insurance claims of Cafe Chameleon, a Cape restaurant.

ICA is a specialist public loss adjustment firm championing the cause of 500 businesses in the tourism and hospitality sector in their battle to get large insurers to pay "business interruption" insurance claims.

ICA said so far insurers have been rejecting claims, even though they have extension cover for infectious and notifiable diseases, saying these policies were never meant to cover pandemics.

“This is a significant win for the tourism and hospitality sector. While there is no doubt  this is precedent setting, we expect the judgment to be appealed, so it is still a long way from payment," ICA's CEO Ryan Woolley said.

Woolley said of critical importance was the fact that judge Andre le Grange, in his judgment passed on June 26, rejected Guardrisk's argument that the losses suffered by Cafe Chameleon were due to the lockdown, and not the Covid-19 pandemic.

Cafe Chameleon went to court seeking, on an urgent basis, an order that Guardrisk was obliged to indemnify the restaurant for the loss suffered as a result of the interruption caused by the Covid-19 pandemic and the resultant promulgation and enforcement of regulations.

The insurer opposed the application.

In his judgment Le Grange said he was satisfied that Cafe Chameleon had established that the insurer was liable to indemnify the restaurant in terms of the business interruption section of the insurance policy for any loss suffered since March 27 as a result of the Covid-19 pandemic in SA, which resulted in the promulgation of lockdown regulations.

The court also ordered Guardrisk to make payments in respect of such losses as the restaurant was able to calculate and quantify from time to time.

ICA said insurers, when rejecting their customers’ claims, have alleged that government regulations in respect of the lockdown were the cause of the loss, and not the pandemic.

“This argument has never made any sense as the insurers chose to insure a notifiable disease which would have contemplated government intervention and restrictions or quarantine.

"It is clear that without Covid-19, there would be no lockdown, so to attempt to separate the two is nothing short of disingenuous,” Woolley said.