Want to fight your insurer over a lockdown claim? The clock may be ticking again
- The clock is ticking again for insurance clients who want to dispute unpaid business interruption claims.
- While the authorities announced recently that so-called time-barring periods have been scrapped, these deadlines are now, for technical reasons, back again.
- That means if you want to dispute a claim or institute legal action, you typically only have 90 days.
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For many restaurants, hotels and guesthouses who believe their insurers must pay out business interruption claims, the clock may be ticking.
The Financial Sector Conduct Authority (FSCA) on Wednesday reversed an announcement, made last month, that so-called time-barring periods have been scrapped - as insurers and their clients get into legal battles that could take some time to be resolved.
That means that if you were thinking of lodging legal action against your insurer after they rejected your claim, or were thinking of filing a dispute, you have a deadline. These clauses differ for each insurer, but are typically 90 days.
Last month the FSCA announced that insurers had agreed to waive these time barring periods for business interruption claims. Following consultation with insurers, however, the FSCA has been advised “that this is not possible for all insurers due to reinsurance contracts”.
Some insurers, including Santam and Bryte, previously indicated that they’ll waive these time barring clauses.
After being unable to do business for months, many restaurants, bars, hotels and guesthouses are demanding that their insurers pay out business interruption claims for the financial harm they suffered while being under lockdown. Some business interruption policies include cover for contagious diseases. But some of the large insurers are refusing.
Many clients are resorting to legal action following unsuccessful claims. Hundreds of policyholders - led by Insurance Claims Africa (ICA) – are threatening a class action lawsuit. Santam is already being sued by two of its clients for its refusal to pay out business interruption claims, and the case will be heard on 1 September in the Western Cape High Court.
The time-barring period was originally waived by some insurers because they're waiting for the courts to give clarity on business interruption policies. Specifically, they're contesting radius-based business interruption extensions. Under such a policy, you may have a claim if the outbreak of an infectious disease falls within a certain radius of your premises, and so forced you to close.
Insurers argue that it is lockdown which caused the economic damage, not Covid-19.
“I suspect most insurers will not reverse their decision to suspend these time barring periods for lodging disputes or instituting legal action following a claim rejection,” says Jan Wink, managing director of Incompass Insurance Consultants.
“Santam and Bryte have already communicated that the time barring periods are suspended, and I doubt they will change their mind now. There's hypersensitivity in the hospitality market at present, and they're cognisant of this,” he says.
The FSCA recommends policyholders check with their brokers or legal representatives to see whether their insurer is still waiving the period.
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