Santam to pay R1bn to clients hit hard by COVID-19 lock-down

South Africa’s largest short-term insurer, Santam has made a significant move by pledging up to R1 billion in relief to its business interruption clients within the small and medium-sized leisure, hospitality, and nonessential retail businesses. This relief comes after a series of legal battles with South African insurers pushing back on the payments of business interruption cover during the national lockdown. The announcement of this relief fund has brought some relief to SMMEs, but questions still linger about the extent of coverage and the ongoing legal battles in the insurance industry. Ryan Woolley, CEO of Insurance Claims Africa, sheds some light on the latest developments in this ongoing saga. The recent move by Santam to set aside R1 billion in relief for its clients has been perceived as a positive step in the right direction. While Woolley acknowledges this as a good start, he remains cautious about the implications and outcomes of this relief fund. He states, 'It's another step in the right direction. I think that we're a bit circumspect about what it means. But for our clients, we're going to call a plan for this relief.' However, he emphasizes that more clarity is needed on the extent of coverage and whether it will be sufficient to address the losses faced by businesses. Santam has specified that the relief fund is capped at R1.5 million per policyholder, with varying limits for different types of businesses. Woolley points out that the legal battles with insurers are far from over, and they will continue to seek legal clarity to ensure that their clients receive fair compensation. He mentions, 'We'll be seeking that legal clarity in court, or entertaining any sensible solution that the insurance put in front of us.' The core issue in the legal disputes between insurers and business owners is the interpretation of policy wording regarding business interruption cover. Woolley explains that the policies were designed to cover losses caused by a notable, verifiable, and infectious disease that requires government-imposed restrictions or quarantines. However, insurers like Santam argue that their policies only cover localized outbreaks of diseases and not the consequential impact of a nationwide lockdown. Despite this stance, Woolley remains confident in the legal precedent set in the courts and believes that the insurers' interpretation is flawed. He highlights a previous judgment in the courts that ruled in favor of the business owner, setting a precedent for similar cases in the future. Woolley expresses his confidence in the upcoming legal proceedings, stating, 'We've already had a judgment in the cap ports that's awarded against the insurer, the virus in that case. I think that the judgment was quite resounding... So we've got no reason to doubt that we wouldn't see the same result coming through September.' As the legal battles continue between insurers and business owners, the outcome of the court rulings in September will have far-reaching implications for the insurance industry and the businesses impacted by the COVID-19 lockdown. The resolution of these disputes will not only determine the financial relief for affected businesses but also set a precedent for future claims and policy interpretations in the insurance sector. The decision by Santam to allocate R1 billion in relief is a step in the right direction, but the ultimate test lies in the legal clarity and fairness of compensation for business interruption losses.