The Covid-19 insurance cases that South Africans should know about
5 min read
Despite early court rulings in favour of policyholders, some businesses with Covid-19-related losses will not have business interruption cover in terms of the Financial Conduct Authority (FCA) test case determined in the United Kingdom (UK) at the end of October.
The outcomes of the first test cases have shown that it is ultimately the wording of insurance policies that determines who is covered and who is not – and wordings are subject to widely differing interpretations, says Christine Rodrigues, partner at law firm Bowmans.

"So far, the court cases dealing with business interruption claims have largely gone in favour of policyholders," she said.

"In the United States, policyholders have not been as lucky as most policy wordings require a direct physical loss in order for cover to be triggered," said Rodrigues.

Narrowing down interpretations

South Africa's first case, decided in the High Court of Cape Town, found in favour of the policyholder Café Chameleon, the legal expert said.

"The insurer had rejected the business interruption claim on the basis that the policyholder's loss was not covered under the Notifiable Diseases Extension clause in the insurance policy," she said.

"The reason given was that the direct cause was the lockdown imposed by the Disaster Management Act Regulations and not the Covid-19 pandemic."

Rodrigues said that the High Court of Cape Town disagreed with the insurer's argument and held that the insurance policy must be interpreted so its provisions 'receive fair and sensible application, having regard to the context and to ensure a business-like or commercially sound result'.

It further held that the policy cannot be interpreted with reference to other policies or based on generalised concerns about the impact of Covid-19 on the insurance industry at large.

Rodrigues said that the FCA case in the UK also made some key points on fairness to the insurer and insured alike.

"The FCA test case is particularly important because although in layman's terms,…
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