• Adami Geldenhuys

Recent Developments on Business Interruption Insurance (Updated on 17 December 2020)

Updated: Dec 17, 2020

An extract from the recent editions of the Lexinfo Insurance Law Alerts

One of the popular topics currently featured in our weekly Insurance Law Alerts is business interruption insurance. The topic relates to the claims for losses resulting from the Covid-19 pandemic. The subject is also covered by our daily Covid-19 Regulatory Update.

The first South African judgment on this matter was Cafe Chameleon CC v Guardrisk Insurance Company Ltd (5736/2020) [2020] ZAWCHC 65; [2020] 4 All SA 41 (WCC) (26 June 2020).

The appeal judgment in the Café Chameleon matter was handed down on 17 December 2020. A summary of this judgment is provided here below:

Guardrisk Insurance Company Limited v Cafe Chameleon CC (632/20) [2020] ZASCA 173 (17 December 2020) .

Insurance law – contract providing cover for loss resulting in interruption of business for notifiable disease occurring within 50 km of business premises – whether Covid-19 pandemic contemplated – whether government response imposing national lockdown forms part of the insured peril – whether national lockdown causally linked to local occurrence of disease.

"Conclusion: [67] The central question in this appeal was whether the government’s composition of a lockdown in response to multiple outbreaks of a ‘notifiable disease’ i.e. Covid-19, throughout the country, and predominantly in Cape Town, where Café Chameleon’s operates its business, was covered by the infectious diseases clause. The question was answered in favour of Café Chameleon, as was the question whether the outbreak of Covid-19 in Cape Town was the cause of its business interruption. In coming to this conclusion I am fortified by much of the reasoning in the FCA case and two recent judgments of the Western Cape High Court: Ma-Afrika Hotels and Another v Santam Limited and Interfax (Pty) Ltd and Another v Old Mutual."

SCA judgment is available at http://www.saflii.org/za/cases/ZASCA/2020/173.html

The following business interruption judgments were handed down in November:

Ma-Afrika Hotels (Pty) Ltd and Another v Santam Limited (6499/2020) [2020] ZAWCHC 160 (17 November 2020)

Covid-19 – business interruption insurance – applicants seek declaratory orders that Santam is liable to indemnify them for losses ‘…occasioned by the occurrence of a notifiable disease in the form of Covid-19 occurring within a radius of 40 kilometres of the insured premises’ and that indemnity period for loss incurred by each establishment is 18 months – interpretation of infectious disease extension clause – trends clauses – developments in international litigation – causation and the insured peril – the ‘but for’ test – indemnity period – applicants have existing contractual right to indemnity under the infectious diseases clause and to indemnity period of eighteen (18) months – respondent ordered to pay costs.


Grassy Knoll Trading 78 CC t/a Fat Cactus and Another v Guardrisk Insurance Company Limited (10035/2020) [2020] ZAWCHC 168 (20 November 2020)

Business interruption insurance – application for declaratory order that respondent obliged to indemnify them for losses suffered as result of business interruption caused by Covid-19 – interpretation of insurance contracts and disease clause – two principal issues of interpretation: 1) nature and scope of insured peril described by words “notifiable Disease occurring within radius of 50 kilometres of the premises; 2) causal relationship between notifiable disease peril and business interruption ­– government measures in response to Covid-19 – relief opposed on basis that business interruption suffered was not caused by occurrence of COVID-19 within 50 km radius of applicants’ premises, but by global pandemic and government’s response it –respondent liable to indemnify applicants for any loss suffered as result of interruption or interference with business cause by Covid-19 pandemic and government measures in response to pandemic – respondent to pay costs of application.


Interfax (Pty) Ltd and Another v Old Mutual Insure Ltd (10906/2020) [2020] ZAWCHC 166 (25 November 2020)

Business interruption insurance – Application for declarator that respondent is liable for losses suffered by applicant, calculated in accordance with definition of loss of gross profit set out in policy and subject to maximum period of 6 months – Whether applicant’s business was interrupted in consequence of loss caused by contagious or infectious disease within 50 km radius of its various premises which in turn triggered regulatory response – Interpretation of contract – Causation – Entitlement to interim payment – Declared that applicant enjoys insurance cover under business interruption section of its policy with respondent – Promulgation and enforcement of Regulations under Disaster Management Act 57 of 2002 in response to COVID-19 pandemic and resultant interruption of applicant’s businesses constituted defined events for purposes of policy – Respondent obliged to indemnify applicant for such loss of gross profit as applicant may have been sustained – Respondent directed to assess and pay applicant’s claims. http://www.saflii.org/za/cases/ZAWCHC/2020/166.pdf

View more information on our weekly Insurance Law Alert https://www.lexinfo.co.za/lexinfo-insurance-law-alert or contact us for a free evaluation copy at alert@lexinfo.co.za.


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