Insurers leave hospitality sector in the lurch by declining lockdown claims
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Businesses have been hit hard by the Covid-19 crisis lockdown and the fear many people about using services seen to carry a high risk of infection. While information on the pandemic accumulated rapidly by March, there was still significant uncertainty about areas conducive to rapid transmission, necessitating a cautious early responses on the part of governments around the world.
However, many businesses in SA anticipated an epidemic or pandemic by taking out business-interruption insurance to cater for closures resulting from a disease. Yet when they approached insurers to claim on their policies a raft of short-term insurers opted to decline the claims, arguing that the policies did not provide coverage for this contingency.
The hospitality industry — hotels, lodges and restaurants, comprising about 50,000 small and medium-sized business in SA — in effect had the rug pulled out from under their feet. Not only had the government expressly closed their businesses without warning, but the insurance coverage they had purchased for just such a contingency was declined en masse.
In one fell swoop a sector crucial to the SA economy faced, and is still facing, financial ruin. The hospitality industry is central to tourism, both international and domestic, which traditionally contributes about 8.6% to GDP. It generates about R120bn in foreign currency and supports about 1.5-million jobs. It is a mature industry that contributes significantly to the resilience of domestic economy.
Internationally, governments go to great lengths to ensure temporary crises do not result in permanent disintegration of strategic industries that generate sustainable jobs, economic growth and tax revenue. But the SA government faces severe capability constraints and has been unable to support the economy properly through the Covid-19 crisis.
This has pretty much left survival up to private actors and arrangements. While the hospitality industry took appropriate precautions against an epidemic so as not to rely on the government, SA’s well-heeled financial services sector has in effect raised the drawbridge and released crocodiles into the moat.
The question of whether this nonpayment is legally defensible is now before the courts. One case, between Guardrisk and Café Chameleon, successfully resolved for the claimant but was immediately appealed. Other cases involving Santam and Hollard will land soon.
This industry-wide nonpayment of claims also attracted the attention of the industry regulator, the Financial Sector Conduct Authority (FSCA), which intervened to get the insurers to make interim payments to the distressed claimants pending ...
However, many businesses in SA anticipated an epidemic or pandemic by taking out business-interruption insurance to cater for closures resulting from a disease. Yet when they approached insurers to claim on their policies a raft of short-term insurers opted to decline the claims, arguing that the policies did not provide coverage for this contingency.
The hospitality industry — hotels, lodges and restaurants, comprising about 50,000 small and medium-sized business in SA — in effect had the rug pulled out from under their feet. Not only had the government expressly closed their businesses without warning, but the insurance coverage they had purchased for just such a contingency was declined en masse.
In one fell swoop a sector crucial to the SA economy faced, and is still facing, financial ruin. The hospitality industry is central to tourism, both international and domestic, which traditionally contributes about 8.6% to GDP. It generates about R120bn in foreign currency and supports about 1.5-million jobs. It is a mature industry that contributes significantly to the resilience of domestic economy.
Internationally, governments go to great lengths to ensure temporary crises do not result in permanent disintegration of strategic industries that generate sustainable jobs, economic growth and tax revenue. But the SA government faces severe capability constraints and has been unable to support the economy properly through the Covid-19 crisis.
This has pretty much left survival up to private actors and arrangements. While the hospitality industry took appropriate precautions against an epidemic so as not to rely on the government, SA’s well-heeled financial services sector has in effect raised the drawbridge and released crocodiles into the moat.
The question of whether this nonpayment is legally defensible is now before the courts. One case, between Guardrisk and Café Chameleon, successfully resolved for the claimant but was immediately appealed. Other cases involving Santam and Hollard will land soon.
This industry-wide nonpayment of claims also attracted the attention of the industry regulator, the Financial Sector Conduct Authority (FSCA), which intervened to get the insurers to make interim payments to the distressed claimants pending ...
