The effect of the COVID-19 pandemic and resultant national lockdown has had an economic impact on several businesses across South Africa. Many businesses especially those in the hospitality and food service industries were faced with operational restrictions leading to a high rise in claims on business interruption policies. However, with legal complexities surrounding Contingent Business Interruption (CBI) policy wordings, many of these claims were unsuccessful leading to a flood of court cases to interpret policy wordings. Over the past few months, the non-life insurance industry has been eagerly awaiting legal certainty from the South African courts in respect of CBI cover – this has now been provided in an Appeal court decision.
In the matter between Guardrisk Insurance Company Limited v Café Chameleon CC, the Supreme Court of Appeal (SCA) considered the policy wording before it and found that the insured peril includes both the occurrence of the notifiable disease within the radius as well as the government’s response to it. A similar finding was made by the Western Cape High Court in the recent matter between Ma-Afrika Hotels and Another v Santam Limited where the court found that COVID-19 and the government’s response to it are an inseparable part of the same insured peril.
The SCA has supported much of the reasoning of the Western Cape High Court in two separate matters. Accordingly, the Financial Sector Conduct Authority (FSCA) believes that the SCA has now provided legal certainty on these matters.
In a recent FSCA Press Release, it was stated that in light of the SCA judgment, the FSCA expects the non-life insurance industry to honour its CBI cover obligations and to make payment of valid CBI claims without delay.
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