Ina Opperman
Business Journalist
4 minute read
25 Jan 2021
11:37 am

Santam relents and agrees to pay out Covid-19 business interruption claims

Ina Opperman

In November, a full bench of the Western Cape High Court found in favour of Ma-Afrika Hotels and Stellenbosch Kitchen against Santam after the insurance giant rejected their business interruption claims.

Santam announced on morning Monday that it would now settle valid claims for all commercial policies with contingent business interruption (CBI) extensions, in addition to those covered by its hospitality and leisure division that it agreed to settle earlier in January, that had been specifically affected by court judgments.

This means that claims of the total base of Santam’s 4000 commercial clients with CBI policy extensions, that cover contagious and infectious diseases, will be paid out. The earlier decision for hospitality and leisure clients affected 1300 clients. Large corporate policies in Santam’s specialist business will be handled on an individual basis due to their bespoke and complex nature.

Court ordered Santam to pay business interruption claims

In November, a full bench of the Western Cape High Court found in favour of Ma-Afrika Hotels and Stellenbosch Kitchen against Santam after the insurance giant rejected their business interruption claims, although its policies included cover for infectious or notifiable diseases.

The court ordered Santam to pay the full business interruption losses, including the impact of the government’s response to Covid-19 over the entire policy period of 18 months, without limitations, as well as Ma-Afrika’s legal costs.

ALSO READ: Court orders insurance giants to pay business claims

Ma-Afrika Hotels and Stellenbosch Kitchen approached the court for two declaratory orders:

  • to hold Santam liable to cover them for losses caused by a notifiable disease in the form of Covid-19 occurring within a radius of 40km of the insured premises
  • to order that the period covered is 18 months.

Santam rejected the claims because it said a notifiable disease did not occur within a 40km radius of the business premises and that the losses were due to the lockdown and/or general concern or fear of the public. The insurance giant also said that the policies covered insured loss and not economic hardship as a consequence of the Covid-19 pandemic.

However, the court concluded that Covid-19 and government’s response to it were inseparably part of the same insured peril. In the court’s view, the losses Ma-Afrika hotels and Stellenbosch Kitchen suffered were exactly what they had insured themselves against and had to be put in the position that they would have been in had the insured peril not occurred.

In Monday’s statement, Santam said following further engagements with stakeholders, it had concluded that the core of the judgments in these cases could be applied in principle to all policies with CBI extensions.

Claims assessment

According to Santam, the assessment process for CBI claims required businesses to provide financial statements and other necessary documentation to support their claims. The insurer urged its clients to work closely with their intermediaries to ensure that the requirements for processing claims were met.


Santam said it had made good progress with policies in the hospitality and leisure division to allocate assessors to claims and that it was well geared to process the volume of CBI claims by arranging for additional resources with the relevant expertise.

ALSO READ: Santam to reassess Covid-19 business interruption claims

Legal certainty

“We are pleased to have reached a point where we have a level of legal certainty that enables us to proceed with the assessment and settlement of all valid CBI claims as quickly as possible,” Lizé Lambrechts, Santam Group chief executive officer, said.

Santam had been acutely conscious throughout the process of establishing legal certainty that clients were under exceptional pressure because of the impact of Covid-19 and the associated measures taken by the Government to deal with the pandemic. Therefore, Santam paid interim relief of R1-billion to small and medium-sized enterprises (SMEs) impacted by the lockdown, she explained.

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“While the process of establishing legal certainty may have felt lengthy, it was completed as expeditiously as possible in the interests of clarity for clients, insurers and reinsurers. The unprecedented circumstances of the pandemic made it critical to go through this process to conclusively address the uncertainties we all faced.

“We are therefore pleased that the core issue of establishing what is covered in the policies has been dealt with sufficiently by courts in South Africa, the UK and elsewhere for us to move ahead with the claims assessment and settlement process,” she said.

ALSO READ: Santam’s offer of three months for business interruption claims ‘unconscionable’

According to Lambrechts, the indemnity period was relevant only to the hospitality and leisure division and represents a minority of the total CBI policies at Santam. The company is appealing the judgment of the Western Cape High Court regarding the indemnity period.

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