- Santam pushed ahead with its application to appeal the business interruption claims case against hotels group Ma-Afrika on Tuesday.
- The insurer says it disagrees with a court ruling that the hospitality group must be paid for 18 months' losses.
- The Western Cape High Court ruled in November 2020 that Santam must indemnify Ma-Afrika for 18 months, even though intra-provincial leisure hotel stays were allowed from August.
Santam says it cannot be held liable for 18 months' losses suffered by any of its clients because of the lockdown.
The insurer approached the Western Cape High Court on Tuesday, where a full bench of judges heard its arguments for wanting to take its case to the Supreme Court of Appeal (SCA) in Bloemfontein, stating that its insurance policies were clear that clients were covered only for three months under its infectious disease clause.
In November 2020, the Western Cape High Court ordered the insurer to pay one of its clients, Ma-Afrika, for a period of 18 months. Although the hard lockdown that prohibited hotels from accepting leisure travellers began to ease at intra-provincial level in August 2020, the Court ruled then that Ma-Afrika was covered for an indemnity period of 18 months.
Santam has started settling business-interruption claims caused by the lockdown as it accepted the court's interpretation that both Covid-19 and government's response to it were insured under the insurer's infectious disease extension.
However, it still pushed for the appeal to challenge the 18-month period.
The different indemnity periods
Evidence presented by Ma-Afrika's and the Insurance Claims Africa's (ICA) legal team showed that Santam's business-interruption policy document did indeed state an indemnity period of 18 months, but a subsection dealing specifically with "extensions" limited the indemnity period to three months.
So, events that would be covered for 18 months include interruptions caused by fire damage, structural damage to buildings, theft of movable property and any other material damages.
"So, if a building burns down, there is 18 months worth of business-interruption insurance. But that does not deal with the extensions. Extensions carry three months," said Santam's lawyer, Thomas Plewman, QC.
Ma-Afrika's policy document presented by the hotel's lawyer listed several extensions to which this limited three-month indemnity period applied, including revenue losses caused by prevention of access to the insured premises, loss of key tenants and loss of tourist attraction. But it made no mention of losses caused by infectious diseases under this subsection.
Plewman however argued that while infectious disease was not listed under the subsection labelled "extensions and clauses", it was clear in all the insurer's communication and listed elsewhere in Ma-Afrika's policy schedule as an "extension" and was therefore subject to the same rules.
"The language is entirely clear. It says, 'extensions have an indemnity period of three months'; that is incapable of being read ambiguously. The only question is: Is the infectious disease clause an extension? And it is," said Plewman.
Plewman added that none of the precedent cases that have dealt with the interpretation of insurance policies in the past dealt with the indemnity period and thus the SCA has not made a ruling on this "basic bargaining between the parties".
Too much at stake for clients
However, Ma-Afrika's lawyer, Jeremy Gauntlett, QC, said an owner of a small restaurant or a small hotel could not reasonably be expected to have made a distinction between the two indemnity periods. More so because the "infectious disease" extension was not specifically included under events with the limited three-month indemnity period.
He said this case was "everything" to his clients and Santam had not advanced any argument that this would cripple it.
"We are talking about Stellenbosch Kitchen, we are talking about a Zonnebloem small hotel, we are talking about Santam. With great respect, it did not make any other compelling case [for wanting to take the matter to the SCA]," said Guntlett.
He said if there was no other compelling reason to refer the matter to the SCA other than to interpret "one clause, in one contract"; the court should pounder whether the insurer was pursuing this as a necessary appeal or "for reasons to which one can only speculate".
Guntlett added that Santam had not raised any new legal issues in its appeal application that the SCA must consider. In its heads of argument, Ma-Afrika also stated that Santam has publicly admitted that the Western Cape High Court's ruling on the indemnity period applied only to the Ma-Afrika policy and that indemnity periods for other clients would depend on the "individual facts".
The Western Cape High Court reserved its judgment on Tuesday but if it grants Santam leave to appeal, it could mean more months of waiting for Santam clients who do to want to accept only three months' worth of payments from the insurer.
Plewman however said Santam would work with Ma-Afrika to urge the SCA to expedite the appeal process if it is granted the go-ahead, because it also wants to put this issue to bed.