Business Interruption Cover – Santam

Hi to all our valued Santam Commercial clients !!

As a result of all the media attention that has surrounded the recent court cases aimed at insurers, including SANTAM, regarding Business Interruption claims not being paid out for losses due to COVID, and now the turnaround whereby some claims are now being settled,as your broker I felt it necessary just to clarify a few facts regarding this :

Firstly normal Business Interruption cover for commercial clients pays out for losses of profit due to the occurrence of an insured peril event like fire or flash flooding. If we take the example of a fire eg the office building and factory burns down, the business would have to relocate premises as a result.  In this event, the business relocates but still has to pay certain standing charges even though income would be affected by this trauma. There are extensions to this cover like prolonged disruption of public utilities like electricity, water etc…as well as disruptions of these same perils to certain main suppliers of the business that would affect the businesses income as a direct result.  THERE IS NO COVER FOR LOSSES DUE TO INFECTIOUS DISEASES UNDER THIS NORMAL BUSINESS INTERRUPTION COVER.

Then in the Hospitality trade, like restaurants, guesthouses etc …There are certain niche products that were issued in the past for those types of risks only, and the Business Interruption cover that was included in those niche policies in some cases had AN INFECTIOUS DISEASE extension on this cover.  This is known as Contingent Business Interruption cover.  The wording however does not, and never has, included cover for a worldwide epidemic.  It covers a business for financial losses if there is an infectious disease within a 50 km radius of that business that directly affects that business, that causes that business to be quarantined and as a result, losses of income are incurred.  It is specific to an area and specific to that particular business, not meant to cover everybody due to a worldwide epidemic.  These are the policy holders that have decided to litigate as a result of claims not being paid.

This cover was issued on niche products in the past and this extension on many of these niche products is no longer available.  There are clients that still have these policies in force and still have this Contingent Business Interruption cover.

Due to many discussions with the Financial Services Conduct Authority and insurers, Santam have decided to pay some of these claims on a goodwill basis due to the dire situations of many SME’S, but to be clear, these policy wordings did not include worldwide epidemics.

The normal Business Interruption cover is in place for many of you as a commercial client, NOT this CONTINGENT BUSINESS INTERRUPTION cover so as a result there is no cover for losses due to COVID unfortunately. Even though many of your businesses have suffered losses during this time, some have even closed down sadly, we feel for you in this time and are also happy to help reshuffle covers and reduce covers where possible during this trying time and assist you with your financial planning.  Please advise me if you would like a zoom or telephonic discussion regarding this.

We hope that this clarifies a lot of questions regarding this issue and you are welcome to call to discuss any further questions that you might have.

Trust you are all keeping safe and well during these uncertain times.

Sending warm regards

Avril Hansmeyer

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