Insurance Law – Unrest Aftermath: Business, Insurer or SASRIA – Who Bears the Cost?

After a whole week of turmoil, violence, killings, looting, etc., the dust seems to be settling and things seem to be getting back to ‘normal’. There have been major destructions to commercial properties; infrastructure, etc. Most of the affected businesses have announced temporary closures. Presumably, this is to, inter alia, allow businesses to engage their insurers and find solutions in order to get the businesses operating, again. Most businesses have insurance policies in place. Claiming from the insurers is not always without hurdles and it can be a lengthy process. Due to the nature and scale of recent destructions, the claiming process will most likely take longer. Further, there have been talks about South African Special Risks Insurance Association (“SASRIA” henceforth) – which some businesses may not be aware of. As things seem to be settling and getting back to normal, it is appropriate to look at some of the factors/questions that may be relevant for businesses; insurers and SASRIA at this point. Questions such as – who should be liable for the costs of damage; when will the insurer and/or SASRIA be liable and what will determine the liable party; the various platforms which can be utilised by businesses to resolve disputes, if any.

To get the claiming process started, the relevant business official will have to lodge a claim with the business insurer. The insurer will consider the nature of the claim lodged against the policy to verify whether a claim lodged falls within the ambits of the policy and to verify whether the policy makes a provision for SASRIA coverage. Ordinarily, if the claim lodged falls within the parameters of the policy, the insurer would involve an assessor who will assess, evaluate, and investigate the claim. The assessor will thereafter compile a report and make recommendations to the insurance company. Only after that process has been completed will the insurer deliver in terms of the policy. There may be cases, however, where the insurer may argue that the claim lodged is covered by SASRIA. SASRIA may, in turn, fully or partially approve or reject the claim. The validity of the rejection will be determined by the contents and the wording of the policy. Over the years, our courts have developed legal principles with which insurance policies have to be construed. Factors such as – context; purpose; good faith; wording and the intention underlying the contract; regard to international and foreign law, etc. are all relevant in this regard. The contract (within a contract) between the insurer and SASRIA may have exceptions e.g., a provision stating that SASRIA will not be liable for theft. In the recent events in question, there are instances where it may be difficult to distinctly tell whether this is as a result of a political/civil unrest (in which case SASRIA provisions will be activated) or it is pure acts of criminality (in which case the insurer will be liable). It is also possible to have an overlap of these two instances in which case the insurer and SASRIA may consider apportionment. The assessor’s findings herein will play a pivotal role. Any dispute(s) between the insurer and SASRIA will inevitably be felt by the concerned business – in which case they may be consequential claims for interruption of business/loss of income.

If a claim is repudiated by both the insurer and SASRIA, it is important for a business to swiftly seek legal advice whether it can and should challenge the repudiation. Importantly, the insurer and/or SASRIA may partially repudiate in which case they may argue that the business failed or neglected to implement certain measures to mitigate a risk. It may be prudent to obtain legal advice in this instance too. If, upon receipt of a legal advice, the business decides to challenge the repudiation, the business may opt to go the Ombudsman route or court or arbitration. The determination of the forum will be determined on a case-by-case basis – taking into account the nature of the dispute; the extent and costs of the damage; the prevailing legal complications; the urgency of resolving the dispute; etc. Although legal representation is not needed in the Ombudsman route, it is still sagacious to make use of legal experts who will assist in formulating submissions and drafting same in an appropriate manner. Of significance, businesses should move with speed in obtaining legal advice considering the time-bar clauses which are prevalent in insurance policies.

In view of the aforesaid, where there has been a repudiation, a business can, depending on the facts and the circumstances, challenge the repudiation. The business may recover their loss from the insurer and/or SASRIA. In rare instances, a business may have no recourse against any of the 2 (where the business is not covered for the relevant peril) in which case the business itself will have to bear the costs.

Mthokozisi Maphumulo
Mtho Maphumulo
Associate | Litigation Attorney
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