There has been enough said on the negative effects experienced in the commercial sector as a result of the Covid-19 National Lockdown. However, as we move through the various stages restrictions and inadvertently, peaks and troughs in productivity; it is important to assess our reactions to these effects and whether these reactions, across the board, have been appropriate.

The short-term insurance sector has experienced an influx of interest and claims arising as result of the impact experienced during lockdown. Business Interruption Insurance is possibly one of the most highlighted arrears of concern in respect of assessing our current abilities to deal with this impact. We therefore unpack the recent developments in respect of same as follows:


How Have Insurers Reacted To Claims For Business Interruption During Lockdown 

Whether you are covered for business interruption is ordinarily determined by a policy-holder’s policy document. Most business interruption policies are short-term insurance policies and usually require a form of “damage event” to trigger cover in that instance. However, there are instances where cover for business interruption insurance is a standalone policy. These are usually more complex and have a number of qualifying factors in respect of the relevant claims.

During the various phases of lockdown, numerous business experienced business interruption as a result of the various restrictions imposed and it appears that the hospitality sector was one of the hardest hit.

When dealing with the surge of claims for business interruption insurance, a number of insurers appear not to be regarding the lockdown as the “damage event” or “insured event” required to trigger cover for business interruption. Insurers appear to be of the view that the actual infection may be an insurable event if the policy document covers for business interruption in respect of infectious diseases, but the lockdown is not.

This approach appears to stem from the idea that it was not the disease that caused the lockdown but rather the government-imposed regulations and restrictions and is rather problematic as it appears to disregard or ignore the connection between the disease and the lockdown.

Even in instances where the policy document provides for business interruption cover in respect of infectious diseases; insurers appear to be constantly shifting the goal post by tacking on what appears to be additional requirements for assessing a claim.


Possible Recourse

 A business that is of the view that a claim for business interruption insurance was irregularly rejected may refer their claim to the short-term insurance ombudsman. It is important to try and exhaust all internal mechanisms for resolving the dispute between the insurer and the relative business prior to a referral to the ombudsman.

It is further important to note the jurisdictional limits of the ombudsman as per its terms of reference and that it does not necessarily deal with claims for loss of profit.

Businesses may also approach a court or alternative dispute resolution forum in respect of their rejected claims.


Recent Developments

As mentioned previously, the hospitality sector has experienced one of the harshest realities in respect of business interruption and claims for business interruption insurance. With claims being continuously rejected some business have elected to take on some of the largest insurance providers in a bid to force their hand in paying out claims that appears to be valid in terms of the relevant insurance policies. Insurance Claims Africa (ICA) is currently attempting to negotiate settlement with SANTAM in respect of unpaid business interruption insurance claims. However, with SANTAM rejecting initial proposals we expect judicial intervention to have the final say.

Whilst we await the outcome in respect of the above, the Financial Sector Conduct Authority (hereafter “FSCA”), has indicated that a claim should be valid where the relevant policy document indicates that claims will be covered for infectious diseases occurring on the premises or within a specific radial designation in respect of the relevant business. The FSCA has further indicated that this is based on the provision that the relevant authority has declared that a disease exists in these geographical designations.

Be that as it may, there are certain insurers who maintain their position that they are not required to pay out claims for business interruption insurance under the current circumstances and it appears that we will have to wait for judicial decision before any movement is made in that regard.

In saying that, there have been certain insurers who have paid out claims for business interruption insurance subsequent to the FSCA directions. This appears to be a notable step in the direction of essential relief for some of the most vulnerable sectors of our economy.



It is of extreme importance that policy holders are aware of the mechanisms for claiming business interruption insurance in respect of their specific policy documents. It is further relevant to seek the proper assistance when dealing with the rejection of a claim, where such rejection appears to be invalid. Know your policy and know your recourse.

Contact an attorney at SchoemanLaw Inc for your insurance needs.

<download here>