This question has vexed the insurance industry globally and has been the subject of much debate and the circulation of many legal opinions on the topic. A test case is before the English Courts at present.

Insurers' Position

Insurers contend that business interruption policies were intended to cover localised outbreaks of a notifiable disease at or near the insured premises. They have accordingly not insured a national pandemic, such as Covid-19.

They have also argued that for many businesses, the business interruption's cause was the lockdown itself - and by extension the legislative framework of the Disaster Management Act - and not the existence of the notifiable disease at or near the insured premises (as required by the wording of the Policy).

FSCA Directive

On 18 June 2020 our Financial Sector Conduct Authority issued its own regulatory response setting out its stance on business interruption insurance.

In particular it identified six common categories of Policy wordings and expressed that it was of the firm view that "the national lockdown was not intended and cannot reasonably be interpreted to be a trigger for BI insurance cover claims". The two main elements required for a valid claim are:

•  The business was interrupted by an infectious disease either at the premises or within a specified radius;
•  A competent authority has declared that an infectious disease exists within the specified radius.

It also expressed that requiring Policy holders to, for example, provide proof that people were treated at a hospital nearby, confirmation of the relevant health authority of a confirmed Covid-19 case, or submission of medical records of a person infected within the radius essentially placed too great a burden on the Policy holder and would not amount to fair treatment of financial customers.

It further concluded that insurers who did not deal with business interruption claims in accordance with the communication would be directed to do so in terms of the Financial Sector Regulation Act 9 of 2017.

Click on link to download full article:  INSURANCE Business Interruption Insurance.pdf

RICHARD HOAL -   Partner
  Direct Tel:   031 536 8511
  Cell:  079 496 1799
  Email: rhoal@coxyeats.co.za

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