South African Policyholders Secure Victory for COVID-19-Related Business Interruption Insurance Coverage
The Western Cape High Court recently determined that the "notifiable disease" coverage extensions to business interruption insurance policies provide coverage for losses caused by South Africa’s national COVID-19 lockdown.
With well over 1,000 insurance coverage lawsuits now filed around the globe regarding the scope of coverage for COVID-19-related business interruption losses, insurance companies have attempted to deny coverage even where their insurance policies expressly cover losses caused by "notifiable diseases." However, a South African High Court rejected this insurance company position last week, when it declared that business interruption losses caused by COVID-19 and related government lockdowns "are exactly what" policyholders "had insured themselves against" when purchasing "notifiable disease" coverage. Ma-Afrika Hotels (Pty) Ltd and Another v Santam Limited (6499/2020) [2020] ZAWCHC 160 (17 November 2020).
In Ma-Afrika Hotels (PTY) LTD, a hotel chain and a restaurant were forced to shut down due to South Africa’s nationwide COVID-19-related lockdown orders. Both policyholders had purchased business interruption insurance, which covered losses "resulting in interruption or interference with the Business due to…Notifiable Disease occurring at the premises" or "Notifiable Disease occurring within a radius of 40 kilometers of the premises."
Rejecting the insurance company’s unsupported argument that its policies covered only purely local outbreaks of infectious diseases (and not a global pandemic), the South African High Court explained that "[t]he policy does not state that the infectious disease must be limited to a local outbreak only, or that the local authority response must be exclusively due to such local outbreak only, and no other, or that the policy does not respond where the disease and the response is broad and national." Finding for the policyholders, the Court accordingly concluded that "it cannot be said that the nationwide or global events were not contemplated or insured" by the policies.
While much of the focus on COVID-19 insurance coverage disputes has been on the countless cases filed in the United States, insurance coverage decisions in other countries provide valuable insight that can also be of use to commercial policyholders with claims pending in the United States. The ruling in Ma-Afrika Hotels (PTY) LTD is not an isolated victory for policyholders and in reaching its decision, the Court relied upon the English High Court’s very significant ruling for policyholders in the UK Financial Conduct Authority’s COVID-19 Business Interruption Test Case (discussed in our prior Commentary). Additionally, as we previously reported, a French policyholder also brought a successful claim against its insurance companies relating to COVID-19 related losses.
As noted in our prior Commentaries, while still in its early stages, COVID-19 insurance coverage litigation is likely to be protracted and results will likely vary among jurisdictions. However, this latest policyholder victory in South Africa demonstrates that both insurance policy language and logic support policyholder claims for COVID-19-related business interruption losses under the terms of many commercial property insurance policies.
