Business interruption insurance and Covid-19

11 September 2020 477
“I’m a restauranteur and have suffered massive losses during the Covid-19 lockdown. I was just wondering whether there are any insurance options I may have or could look into to make up for some of the losses in my business due to Covid-19?”

To assess whether your business would be able to claim for the impact of Covid-19, it would require an assessment of your business insurance policy wording. Typically, the type of insurance that you could consider to claim from should you have such, is business interruption insurance. Business interruption insurance typically provides coverage to a business owner in the event of interruptions to his business that affects his ability to generate income. Such interruptions could arise from disasters such as floods, fires or other natural disasters etc. as well as possibly infectious or contagious diseases.

Assuming you have business interruption insurance, the first step would be to assess the wording of the policy in respect of business interruption and whether it would cover interruptions to your business resulting from an infectious or contagious disease such as Covid-19. 

If it does, you would then have to assess whether the policy wording is sufficient to cover an incidence like the Covid-19 pandemic. Here it is insightful to take note of the recent case of Cafe Chameleon CC v Guardrisk Insurance Company Ltd (5736/2020) ZAWCHC 65 where the Western Cape High Court ruled against an insurance company and held the insurer liable to indemnify Cafè Chameleon in terms of the business interruption policy section of their business insurance policy for losses suffered since the Covid-19 outbreak and the resultant implementation of the lockdown regulations.

Café Chameleon’s insurance policy indemnified Café Chameleon for business interruption caused by a “human infectious or human contagious disease, an outbreak of which the competent local authority has stipulated shall be notified to them if such contagious disease is reported within a 50-kilometre radius of Café Chameleon’s premises.”

The insurance company sought to oppose the claim arguing that Café Chameleon’s business was interrupted by the Government’s lockdown regulations and not by the presence of a positive case of Covid-19 within its area. The court, however, determined that there was a sufficiently close and direct link between the Covid-19 outbreak and the regulatory regime that interrupted Café Chameleon’s business operations and but for the Covid-19 outbreak the regulations in terms of the Disaster Management Act would never have been issued which in turn lead to the closure of Café Chameleon.  Accordingly, Café Chameleon was held to be covered under the scope of the business interruption insurance. 

It is worthwhile mention that the Café Chameleon is being appealed to the Supreme Court of Appeal and any changes to the current position may need to be monitored.  

Accordingly, taking note of the above, it would be prudent to consult your policy wording and if necessary, enlist the help of your attorney to determine whether you have the necessary insurance and can claim from your insurer for the losses you have suffered.