Many would have thought that all Covid-19 business interruption cases are long finalised. This is not the case. The judgment of late February 2023 in 43 Air School Holdings (Pty) (Ltd) & Others v AIG South Africa Ltd is one of many Covid-19 business interruption cases that are still ongoing. It is not unreasonable to think that this is going to be the case for a foreseeable future. There are many reasons for this including, inter alia, delays associated with processing and investigating the claims; insurers not making a final determination within a reasonable period of time; ongoing disputes between the insurers and the insureds relating to either liability or quantum or both; etc. In some instances, the extreme complexity of the matter dictates that extreme delays are inescapable. Given that such cases are still ongoing, and many others are yet to be brought before courts, it is worthwhile to zoom into the 43 Air School Holdings case – facts, issues for determination, outcomes, and reasons.
43 Air School, PTC and JOC (2nd, 3rd and 4th Applicants) suffered financial losses during 2020 due to the national lockdown declared in terms of the Disaster Management Act. From these 3 Applicants, only the 2nd Applicant, 43 Air School, prepared and submitted a claim to AIG Insurance in March 2020. This claim was repudiated by AIG Insurance. The basis for the repudiation was that the national lockdown was not in response to an incident of Covid-19 within the 25 km radius of Port Alfred and the policy is not a joint policy. AIG Insurance was of the view that the Covid-19 case in Gqeberha cannot be a trigger event for 43 Air School to claim under the policy.
The subsequent claim by 43 Air School was also repudiated on the basis that the claim was not submitted prior to the launch of the application. A business interruption claim by PTC was also rejected on the same basis that it was not submitted prior to the launch of the application. A further reason was, however, furnished – that PTC was not insured in terms of the policy. JOC’s claim was repudiated solely on the basis that it was not submitted prior to the launch of the application.
ISSUES BEFORE THE COURT:
The court identified 3(THREE) issues for determination:
- Whether PTC is indeed an insured in terms of the policy;
- Whether 43 Air School and JOC are entitled to seek a declaratory relief by way of litigation in a case where only 43 Air School submitted a claim for business interruption to AIG insurance from 27 April 2020 to 31 May 2020 which was repudiated by the insurer;
- Whether 43 Air School can successfully claim in terms of the policy for the period during which its business was interrupted due to the lockdown but where the outbreak of Covid-19 occurred within the radial limit on a date after and could not have been the course of the Government’s imposition of the lockdown imposed.
OUTCOME AND REASONS:
In relation to the first issue, the court found that PTC is insured under the policy. In this regard, the court held that facts and documents attached as annexures in the court papers including the questionnaire concluded by the director of the Applicants prove that PTC is insured in terms of the policy. Further, there was an undisputed fact that AIG insurance had paid out a claim submitted by PTC previously.
With respect to the second issue regarding whether 43 Air School, PTC and JOC are entitled to the interdictory relief where only 43 Air School had submitted a claim, the court suggested that this be answered by considering whether the policy was joint and composite. Having had regard to the wording of the policy, although PTC and JOC were not expressly mentioned in the policy, the court held that, “it is evident that it [policy] refers to companies which are managed and controlled as well as subsidiaries which are clearly under the control of Holdings…” The court further had regard to the description of training services offered by these 3(THREE) parties and found that the facilities are inter-related and supportive. Relying on the principles laid out in Guard Risk Insurance Company v Café Chameleon that, “the common law test is thus applied flexibly, recognising that “common sense may have to prevail over strict logic…” the court found that 43 Air School, PTC and JOC should be afforded relief. The court held failure to grant them relief would be absurd.
As explicated above, there are still many business interruption insurance matters that remain unresolved, particularly due to the major events that have triggered such policies such as Covid-19, 2022 April floods, etc. In some instances, insurers are delaying the process and the claim is not finalising; in some instances, there is an agreement with respect to liability, but there remains a dispute regarding the amount to be paid out by the insurer; in some cases, insurers are being evasive and not making a final decision on a claim; etc. In certain instances, it is not the insurer that is delaying the process, it is the intermediary (e.g., a broker) who may have realised that s/he has acted negligently and thus employ stalling tactics. In such case, insureds should not hesitate to seek legal assistance to resolve such disputes expeditiously and to get cooperation from the insurer and/or intermediary.