11 months since the first case, Santam will assess Covid-19 insurance claims

Business Insider SA

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  • It will now start assessing and processing business interruption claims related to the coronavirus on some 4,000 policies outside tourism and restaurants, SA's biggest insurer Santam said on Monday.
  • The announcement is one week shy of 11 months since the first case of the coronavirus was detected in South Africa.
  • Santam is still disputing the amount it is due to pay tourism and hospitality companies.
  • Some insurance companies have – unsuccessfully – offered a variety of peculiar arguments on why business interruption insurance that covers diseases does not cover business interrupted by the coronavirus.
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It will now start assessing and processing claims for another 4,000 clients who have business interruption insurance that covers viral outbreaks, SA's biggest insurance company Santam announced on Monday, a week shy of 11 months since the first case of the coronavirus was detected in South Africa.

Santam started processing claims from some 1,300 policyholders in the tourism and hospitality sectors earlier this month, after it lost a legal challenge from a group of such clients. 

It now says it has started looking at all its commercial clients with relevant coverage "after further analysis and consideration of recent court judgments".

But the legal challenges are not yet over. Santam is limiting at least some of its payouts to losses for only three months, while it turns to the Supreme Court of Appeal to be released from an obligation to pay out for losses that can run up to 18 months.

On Monday the company said the issue of the indemnity period is relevant only to policies from its Hospitality & Leisure division, not its entire commercial base.

Ethically speaking, said high court judge Dennis Davis in late November, insurance companies should be making interim payments on business interruption policies, to help companies survive – but the courts could not compel such payments if there were not provided for in agreements.

Some companies with pandemic coverage have warned that they will go bankrupt before all court cases can be settled, leaving payouts that only help their creditors gain another few cents on the rand after their operations are fully wound up. 

The Davis judgment dealt with a refusal by Old Mutual to pay out business interruption claims, with the company at one point arguing that the phrased "provided that" could be interpreted to mean it is liable only for localised disease outbreaks, not national ones.

Some insurance companies have argued that it was the government response to the virus, not the virus itself, that caused business losses. Others have sought to exclude the impact of a viral pandemic from broad business interruption policies already in force.

But not everyone has struggled to get their insurers to pay. In June, four months after the start of the pandemic, Outsurance said it had started to reach out to small businesses with relevant cover that had not yet lodged claims, as it sorted out payments of around R400,000 each for those who had paid around R10 per month in premiums.

Santam previously told Business Insider South Africa its evaluation would automatically include claims previously rejected, but that the speed of the process would depend on how quickly clients submit the "detailed information" required to assess claims.

"The claims will be assessed on a case-by-case basis and it will depend on how quickly policy holders are able to furnish all the necessary documentation," it said.

On its side, things would move quickly, Santam promised, with extra loss adjusters and other relevant staff assigned to the paperwork.

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