Yesterday afternoon, Just Share attended Santam’s electronic annual general meeting (AGM). We asked the insurer’s board about the company’s refusal to pay out hundreds of policyholders from the tourism and hospitality industry for Covid-related losses.
Santam and other insurers are refusing to pay out under business interruption policies that include interruption as a result of an infectious or contagious notifiable disease. The insurer’s view is that the losses suffered by the claimants are a result of the government-imposed lockdown, and not the result of an infectious disease, and that the claims are therefore not valid.
Santam’s position is in stark contrast to CEO Lizé Lambrechts’ statement on the company’s website that Santam is “absolutely committed to playing our part to help alleviate some of the devastating impacts of this virus.”
When asked by Just Share whether it would reconsider its position in light of a recent judgment of the Western Cape High Court against insurer Guardrisk on the same issue, Santam stood firm in its position that it will “seek clarity from the courts of South Africa”. The board also would not commit to a binding arbitration process to expedite the matter.
This is surprising, given that the Western Cape High Court has provided legal clarity already, finding unequivocally in Café Chameleon v Guardrisk Insurance Company Ltd that the Covid-19 outbreak – not the lockdown – is the legal and factual cause of the claimant’s losses, and that the insurer must pay out the claims.
Insurance Claims Africa (ICA), a public loss adjustment firm, is representing approximately 500 of the affected businesses. Collectively, the total value of their claims with all insurers involved, is between R3.5 billion and R4 billion.
At the AGM, Santam’s board reassured shareholders that, should it be required to pay out on Covid-related claims, its balance sheet would be fine.
Many of Santam’s business continuity policyholders, however, are facing imminent closure, threatening the livelihoods of the thousands of people employed by them. Santam has chosen to go to court to obtain “legal certainty” in the interpretation of the disputed policies; unlike the insurer and its immensely deep pockets, these businesses cannot wait months or years for the resolution of a court process. ICA has already approached Santam with a reasonable settlement proposal, but has been turned away.
At the start of the lockdown period, Santam’s CEO said that Santam has “decided to take a decisive stand and do all we can to support efforts to flatten the curve and lessen the economic impact on fellow South Africans”. She described Santam as “a caring South African corporate”, which is working alongside Government and other stakeholders to help alleviate the suffering of fellow South Africans and to “minimise the financial impact of this crisis.”
In a SENS announcement released yesterday, Santam says that it “understands the financial distress on the businesses and individuals impacted by the National Lockdown to combat COVID-19”, and that it also recognises “the public interest in this matter and [is] therefore seeking legal certainty by having this matter speedily determined by the courts of South Africa”.
It is hard to reconcile this with the company’s actions, which point to a complete lack of awareness of the impacts of its insistence on taking a lengthy, expensive legal approach. Tshifhiwa Tshivhengwa, CEO of the Tourism Business Council of South Africa, has said that for each day of the lockdown the tourism industry loses approximately R748 million. To date it has suffered losses of more than R72 billion.
Emma Schuster of Just Share says: “At the start of the lockdown, we witnessed an outpouring of grand gestures and public commitments to corporate kindness by big companies. Santam was no exception. If there is legal ambiguity in the clauses of the policies held by these small businesses, Santam should take an approach which is in line with its public claims to care about the impacts of Covid-19 on the South African economy and on its clients’ businesses. Instead, the company seems determined to take a short-sighted approach which is eroding its reputation, and which will contribute to the devastation of a swathe of the small tourism and hospitality businesses which are so essential to the South African economy.”