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The impact of Covid-19 on the global insurance industry – South Africa

Wednesday 13 July 2022

Christopher MacRoberts
Clyde & Co Inc, South Africa
christopher.macroberts@clydeco.com

Celeste du Toit 
Clyde & Co Inc, South Africa
celeste.dutoit@clydeco.com​​​​​​​

Yousuf Munshi 
Clyde & Co Inc, South Africa
yousuf.munshi@clydeco.com

South Africa

General questions

Yes/

No/

N/A

Additional comments, if any.

1

Does the country that you are reporting on follow common law jurisprudence?

Yes

While common law (both English law and Roman-Dutch law) is followed, statute would override common law principles, and the Constitution of the Republic of South Africa is the supreme law. As such, common law is followed to the extent that it is consistent with the Constitution. The judiciary is enjoined to develop the common law where it is in conflict with the Constitution.

2

If the answer to the above question is no, does the country you are reporting on follow a civil code? Please describe the judicial system in short.

No

The Constitution of the Republic is the supreme law and consists of a Bill of Rights and a Constitution setting out the fundamental principles of governance, the structure of government (consisting of executive, legislative and judicial branches) and universal rights. There is then legislation, which regulates various aspects of law in the forms of Acts and Regulations made by the legislature. The common law also finds application, along with customary law. However, these are only applicable to the extent that they are consistent with the Constitution. A court may strike down any law which is not consistent with the Constitution or develop it to ensure it is consistent with the Constitution.

3

Please provide a brief description of the legal framework applicable to insurance coverage disputes in the country you are reporting on. In so doing, please consider the following questions:

The legal framework applicable to insurance coverage disputes in South Africa consists of various sources of law. There is legislation which is relevant to insurance, such as the Long-Term Insurance Act, the Short-Term Insurance Act and the Insurance Act, and the regulations promulgated under such Acts. Of particular import are the short-term and long-term policyholder protection rules promulgated under Short-Term Insurance Act and the Long-Term Insurance Act, respectively.

Common law also plays a substantial role in insurance disputes, and much of the common law jurisprudence applicable to insurance coverage disputes has its foundation in principles of English law and is aligned with other Commonwealth jurisdictions. As mentioned above, however, common law is applied to the extent that it is consistent with the Constitution of the Republic.

4

Does the insured bear the burden of establishing coverage of a claim, or does the insurer bear the burden of establishing no coverage? Please give a short description of the legal basis in your country.

Subject to any specific contractual provision which provides otherwise, the generally applicable rule is that the insured bears the onus of demonstrating that its claim falls within the ambit of the policy (see Eagle Star Insurance Co Ltd v Willey 1956 (1) SA 330 (A)), and if this onus has been discharged an insurer would bear the onus of establishing that there is an applicable exclusion, or that there is another reason for which the claim will not be accepted.

5

Are coverage provisions in policies interpreted broadly or is there a presumption in favour of coverage? Please give a short description of the legal basis in your country.

Policies are not interpreted broadly or with a presumption in favour of coverage but are interpreted in line with the settled principles of interpretation of contracts.

The Supreme Court of Appeal confirmed the preferred approach to interpretation of insurance policies in Centriq Insurance Company Limited v Oosthuizen (2019) 1 All SA 291 (SCA):

‘Insurance contracts are contracts like any other and must be construed by having regard to their language, context and purpose in what is a unitary exercise. A commercially sensible meaning is to be adopted instead of one that is insensible or at odds with the purpose of the contract. The analysis is objective and is aimed at establishing what the parties must have taken to have intended, having regard to the words they used in the light of the document as a whole and of the factual matrix within which they concluded the contract [...]

‘Thus, any provision that places a limitation upon an obligation to indemnify is usually restrictively interpreted, for it is the insurer's duty to spell out clearly the specific risks it wishes to exclude. In the event of real ambiguity, the doctrine of interpretation, contra proferentem, applies and the policy is also generally construed against the insurer who frames the policy and inserts the exclusion. But, like other aids to the interpretation of contracts of this nature, the doctrine must not be applied mechanically, for exclusion clauses, like other contractual clauses, must be construed in accordance with their language, context and purpose with a view to achieving a commercially sensible result.

[…]

‘But a word of caution is warranted: courts are not entitled, simply because the policy appears to drive a hard bargain, to lean to a construction more favourable to an insured than the language of the contract, properly construed, permits. For, if that is what the insured contracted for, that is what he is entitled to, and no more. It is not for the courts to construe exclusions in favour of the insured simply because it considers them to be unfair or unreasonable.’

6

Are exclusions interpreted narrowly or is there a presumption against finding that an exclusion to coverage applies? Please give a short description of the legal basis in your country.

Any provision which seeks to limit a clearly expressed obligation to provide an indemnity will be interpreted restrictively. Where ambiguity exists in any exclusion, it is interpreted contra proferentem, that is, against the party who drafted the contract. While certain policies contain express exclusions for the application of the contra proferentem rule, the applicability of such a clause has not as yet been the subject of any judicial pronouncement.

7

Are there universally accepted definitions for:

  • event
  • occurrence
  • damage
  • cause
  • originating cause
  • natural peril
  • force majeure
  • loss
  • consequential loss

If the answer is yes, please give a short description of each definition and the legal basis for that definition (ie, a rule of law, case law etc).

There are not universally accepted definitions for these terms. These words are often defined terms in the policy or contract in question. Where such terms are not defined clearly or at all, a court will interpret the term in line with the rules of interpretation described above.

The term ‘one originating cause’ is commonly encountered in insurance and reinsurance policies and specifically in aggregation clauses. We are not aware of South African case authorities dealing with the interpretation of a single ‘originating cause’. There are, however, a number of relevant decisions of the English courts which have dealt with the analysis and interpretation of similar aggregation wording which would be of persuasive value to a South African court.

In respect of consequential loss, this term has been differentiated from direct loss. Direct loss refers to the immediate or natural consequences of an event, whereas consequential loss refers to the consequences which flow from the direct loss.

Loss causation

Yes/

No/

N/A

Additional comments, if any.

8

Did the country that you are reporting about issue lockdown, stay-at-home or no-travel restrictions in response to Covid-19?

Yes

9

If the answer to the question above is yes, were such orders issued nationally, by state/region or by local city/town. Please give a short description of the issuing authority and the orders issued.

The orders were issued nationally. The government is the issuing authority, through its various departments and principally the Ministry of Cooperative Governance and Traditional Affairs. The orders were for all non-essential businesses to close, people to work from home, a curfew over night-time hours, closure of provincial and national borders and cessation of air and road travel, restrictions on the number of persons at indoor and outdoor gatherings, and mask mandates among other restrictions.

These orders were issued shortly after the first cases of Covid-19 were detected in the country. For the most part, the orders apply uniformly across the country. There have, however, been times where some provinces and municipalities with increased infection rates, were subjected to more stringent orders relative to the rest of the country.

10

If the answer to the above question is yes, were the lockdown, stay-at-home or no-travel restrictions mandatory or recommended?

The restrictions were mandatory.

11

If the country that you are reporting about did issue lockdown, stay-at-home or no-travel restrictions, were those orders suspended or revoked at any point in time? If the answer is yes, please give a short description of the timeline.

The restrictions have not yet been revoked. Instead, the government has introduced what is referred to as a ‘risk-adjusted’ strategy, involving different levels of lockdown orders, from Level 1 (least severe) to Level 5 (most severe). The government, acting through the National Coronavirus Command Council, makes its decision on which level to place the country on depending on the rates of infection.

In summary, the timeline of the differing levels of lockdown to date is as follows:

  • initial ‘hard lockdown’ (later referred to as Level 5) – 26 March 2020 to 31 April 2020;
  • Level 4 lockdown – 1 to 31 May 2020;
  • Level 3 lockdown – 1 June 2020 to 17 August 2020;
  • adjusted Level 3 lockdown – 18 August 2020 to 20 September 2020;
  • Level 1 lockdown – 21 September 2020 to 28 December 2020;
  • adjusted Level 3 lockdown – 29 December 2020 to 28 February 2021;
  • adjusted Level 1 lockdown – 1 March 2021 to 30 May 2021;
  • adjusted Level 2 lockdown – 31 May 2021 to 27 June 2021;
  • adjusted Level 4 lockdown – 28 June 2021 to 25 July 2021;
  • adjusted Level 3 lockdown – 26 July 2021 to 12 September 2021;
  • adjusted Level 2 lockdown – 13 September 2021 to 30 September 2021; and
  • adjusted Level 1 lockdown – 1 October 2021 to date.

12

If the answer to the above question is yes, were subsequent lockdown, stay-at-home or no-travel restrictions issued at any point in time? Please give a short description of the timeline.

See above. The restrictions remain in force but become more or less stringent depending on the level of lockdown orders.

13

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss?

Yes

14

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss? If the answer is yes, please give a short description of the conclusions in the judicial opinions or guidance.

No

15

If the answer to the question above is yes, did the highest court in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by the virus? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

16

If the answer to the above question is no, did the highest court in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by government lockdown or stay-at-home orders? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

17

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss? If the answer is yes, please give a short description of the conclusions in the judicial opinions or guidance.

No

18

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss, have other courts in the country issued such opinions?

Yes

Although South Africa’s apex court which is the Constitutional Court, has not delivered any decisions related to Covid-19 insurance claims, there have been several relevant decisions of the High Courts and of the Supreme Court of Appeal, the second highest court in South Africa.

In the Supreme Court of Appeal (the SCA) the judgment in the matter of Guardrisk Insurance Company Limited v Café Chameleon CC, the Court found the insurer to be liable to indemnify the insured in terms of the disease extension for the financial impact of the national lockdown on the insured’s business, provided that there had been a case(s) of Covid-19 as required by the wording of the policy (ie, within a radius).

In reaching this conclusion, the SCA focused on the nature of infectious and contagious diseases and the fact that a government response almost always follows such a disease, and that this must have been contemplated by the parties. On this basis, the SCA found that the insured peril contained in a disease extension was of a composite nature consisting of two elements: (1) as a qualifying condition or threshold requirement, the outbreak/occurrence (depending on the policy wording) of Covid-19 at the insured premises or within the prescribed radius; and (2) the government response to Covid-19 in South Africa, including the outbreak/occurrence at the premises or within the prescribed radius.

The SCA therefore found that Covid-19 (being inclusive of localised cases as well as the accompanying restrictions) was a cause of insured loss, provided that there had been Covid-19 at the insured premises or within the prescribed radius.

19

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether Covid-19 is a ‘cause’ of insured loss? Please give a short description of the conclusions in the judicial opinions or guidance.

Yes

The SCA’s Café Chameleon judgment has not yet been appealed but is consistent with several earlier decisions of lower courts. The SCA was not required to comment on its decision above in a subsequent case, since the insurer abandoned its arguments in relation to the cause of the insured’s loss (see Santam Limited v Ma-Afrika Hotels (Pty) Ltd & Another [2021] ZASCA 141). However, prior to this, the Western Cape Division of the High Court handed down judgment on two separate instances, which largely accords with the SCA judgment in Café Chameleon (see Ma-Afrika Hotels (Pty) Ltd v Santam Limited 2020 JDR 2375 (WCC) and Interfax Proprietary Limited and Another v Old Mutual Insure Limited 2020 ZAWCHC 166).

20

If the answer to the above question is yes, do courts in the country you are reporting about hold that losses related to Covid-19 were ‘caused’ by the virus? Please give a short description of the conclusions in the judicial opinions or guidance.

Yes

As stated above, the SCA in Café Chameleon found that the insured peril, which needed to be causative of the loss, included both the virus itself (as a qualifying factor) and the government restrictions imposed in South Africa as a whole.

In characterising the insured peril in this manner, it was not necessary for the SCA to consider specifically whether the losses were caused by the virus for purposes of determining coverage. Provided that there were losses caused by the government restrictions (as one part of the peril) and that there was Covid-19 at the premises or within the prescribed radial area (as the qualifying component of the peril), then coverage will be established, irrespective of whether that case of Covid-19 was in any way causative of the loss. In support of this finding, the SCA held that a notifiable disease is almost always accompanied by a government response, and consequently such a response must form part of the peril. It can therefore be said that the SCA concluded that a case of the virus, as required by the policy, was causative of the government response.

The SCA therefore ultimately diluted the causal relevance of the virus itself in finding that the insured peril was inclusive of government restrictions.

21

If the answer to the above question is no, do courts in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by government lockdown or stay-at-home orders? Please give a short description of the conclusions in the judicial opinions or guidance.

Yes

See comments above related to the composite peril approach followed by the SCA in Café Chameleon. The SCA, as well as lower courts, have made findings that the losses were caused by the government restrictions, and as this forms part of the insured peril, the losses are covered by the policies. However more often than not, this was common cause/not an issue in dispute between the parties as the focus of litigation was whether there was a causal link between a localised or in-radius case of Covid-19, the restrictions, and the loss. Courts did therefore not always specifically pronounce on the causal link between losses related to Covid-19 and the government restrictions.

22

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss?

No

23

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss, have other courts in the country issued such opinions? If yes, please give a short description of the conclusions in such judicial opinions or guidance.

Yes

The concept of Covid-19 as an originating cause has not been specifically dealt with by a South African court. However, the findings of the SCA in Café Chameleon do lend themselves to an interpretation in favour of Covid-19 being an originating case. The finding of the SCA that a notifiable disease almost always leads to a government response may be open to the interpretation that Covid-19 is the common denominator or originating source of that which is truly causative of the loss (being the government response). However given the composite construction of the insured peril as described above, these question regarding the causal chain were not specifically pronounced upon.

24

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’?

Yes

While the courts have found that Covid-19 and the government response thereto is an ‘insured event’ or ‘defined event’ as referenced in the policy, there has not been any decision as to: (1) what constitutes an ‘event’; or (2) whether Covid-19 in South Africa as a whole and the government response as a whole (as opposed to individual localised cases and the different government responses and changes in lockdown alert levels) are to be considered as one event or many events. These questions will be of import for purposes of aggregation of losses, and when considering the applicability of exclusions put in place.

25

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’? Please give a short description of the conclusions in the judicial opinions or guidance.

No

26

If the answer to the question above is yes, did the highest court in the country you are reporting about determine that losses related to Covid-19 were covered ‘events’? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

27

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’, have other courts in the country issued such opinions?

Yes

28

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether Covid-19 is a covered ‘event’? Please give a short description of the conclusions in such judicial opinions or guidance.

Yes

See above. While the courts have made findings on Covid-19 and the government response being an ‘insured event’ or ‘defined event’, the question of what constitutes an event and the ambit thereof has not as yet been considered by any court in the context of Covid-19.

29

If the answer to the above question is yes, do courts in the country you are reporting about hold that losses related to Covid-19 are covered ‘events’? Please give a short description of the conclusions in the judicial opinions or guidance.

Yes

See above.

30

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 in the context of loss causation.

Consideration is given to the legal position and sources relied on in other Commonwealth jurisdictions, and particularly the United Kingdom, with particular reference to the Supreme Court decision in the Financial Conduct Authority test case scheme.

Aggregation of claims

Yes/

No/

NA

Additional comments, if any.

31

Does the country you are reporting on permit aggregation of claims arising out of a single originating cause? Please give a short description of the legal basis.

Yes

There are very few South African judicial decisions dealing with aggregation of short-term insurance claims. Decided cases from Commonwealth and common law jurisdictions including England & Wales would have persuasive value to a South African court dealing with the legal basis of aggregation of claims/losses, such as the decision in Spire Healthcare Ltd v Royal & Sun Alliance Insurance Ltd [2022] EWCA Civ 17.

Aggregation of claims arising out of a single event is generally permissible if in accordance with the aggregation clause or wording in a policy.

32

Does the country you are reporting on permit aggregation of claims arising out of a single cause? Please give a short description of the legal basis.

Yes

Aggregation of claims arising out of a single event is generally permissible if in accordance with the aggregation clause or wording in a policy.

33

Does the country you are reporting on permit aggregation of claims arising out of a single event? Please give a short description of the legal basis.

Yes

Aggregation of claims arising out of a single event is generally permissible if in accordance with the aggregation clause or wording in a policy.

34

Does the country you are reporting on use an accepted test for determining whether claims can be aggregated? For example, does the country you are reporting on apply to four unities test to determine whether aggregation is appropriate? Please give a short description of the legal basis.

No

This depends on what is stipulated in the policy wording and generally requires an interpretation of the aggregation language in the policy wording or agreement. In the absence of any clear or express wording, it is anticipated that South African courts will draw guidance from decision in the United Kingdom, and as such the four unities test is likely to be considered and given persuasive value.

35

Have courts in the country you are reporting on issued jurisprudence concerning whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the legal basis.

No

36

Has the highest court in the country you are reporting about issued judicial opinions or guidance concerning whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

37

If the answer to the question above is yes, did the highest court in the country you are reporting about determine whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

38

If the highest court in the country you are reporting on has not issued such jurisprudence, have other courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether insureds may aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

39

If the answer to the above question is yes, do courts in the country you are reporting about permit insureds to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

40

Do the courts in the country you are reporting on permit an insured to aggregate claims related to multiple properties or business locations arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

There have not been any relevant decisions to this effect, so we are unable to say whether this will be permitted and in what circumstances.

41

Do the courts in the country you are reporting on permit an insured to aggregate claims related to multiple lockdown or stay-at-home orders arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

There have not been any relevant decisions to this effect, so we are unable to say whether this will be permitted and in what circumstances.

42

Have courts in the country you are reporting on issued jurisprudence concerning whether cedents can aggregate claims arising out of Covid-19? Please give a short description of the legal basis.

No

43

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether cedents may aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

44

If the answer to the above question is yes, do courts in the country you are reporting about permit cedents to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

45

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 and aggregating claims.

Consideration is given to the legal position and sources relied on in other Commonwealth jurisdictions, and particularly the United Kingdom. Such decisions, where relevant, would be of persuasive value to a South African court.

Property damage

Yes/

No/  

N/A

Additional comments, if any.

46

Have courts in the country you are reporting on issued jurisprudence concerning whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the legal basis.

No

It was generally common cause between insurers and policyholders that losses were not property damage losses, and accordingly this has not been an issue for dispute before a South African court.

47

Has the highest court in the country you are reporting about issued judicial opinions or guidance concerning whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the conclusions in such judicial opinions or guidance.

No

48

If the answer to the question above is yes, did the highest court in the country you are reporting about determine whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

49

If the highest court in the country you are reporting on has not issued such jurisprudence, have other courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether losses arising from Covid-19 constitute property damage? Please give a short description of the conclusions in such judicial opinions or guidance.

No

50

If the answer to the above question is yes, do courts in the country you are reporting about permit insureds to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

51

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 and property damage.

N/A

The Financial Sector Conduct Authority (FSCA) and the Prudential Authority (PA), in Joint Communication 5 of 2020, communicated that in respect of standard business interruption insurance which was dependent on a requirement of physical damage to the policyholder’s premises, ‘an insurer would be obliged to indemnify a policyholder for loss of income only if a policyholder is able to prove physical damage’. On this basis, according to the FSCA, Covid-19 will not be covered in the standard policy, but it is important to note that: (1) Most of the policies have non-damage-based extensions for infectious/contagious diseases, and as such this guidance is not applicable in most instances; and (2) Joint Communication 5 is not binding.

Exclusions

Yes/

No/

N/A

Additional comments, if any.

52

Has Covid-19 been deemed a ‘natural peril’ in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

No

There have not been any relevant decisions to this effect.

53

Has Covid-19 been deemed force majeure in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

Yes

On 19 November 2021, the Western Cape High Court delivered judgment in the matter of The Trustees for the time being of the Bymyam Trust v The Butcher Shop and Grill CC which stated that the Covid-19 regulations promulgated in terms of the Disaster Management Act 57 of 2002 do amount to a vis major (force majeure) or casus fortuitous. However insofar as the disease itself is concerned, there has not been a specific pronouncement.

54

Is Covid-19 acknowledged as a notifiable disease in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

Yes

In terms of the regulations relating to the surveillance and control of notifiable medical conditions under the National Health Act, 2003 (‘Notifiable Disease Regulations’), a ‘notifiable medical condition’ is defined to mean:

‘a medical condition, disease or infection of public health importance that is classified as notifiable in terms of Regulation 12’.

Regulation 12 in turn states that: ‘The medical conditions listed in Annexure A, Tables 1, 2, 3 and 4 are hereby declared to be notifiable medical conditions.’

Table 1 of Annexure A to the Notifiable Disease Regulations lists Category 1 notifiable medical conditions which require immediate reporting by the most rapid means available upon diagnosis followed by a written or electronic notification to the Department of Health within 24 hours of diagnosis by healthcare providers, private health laboratories or public health laboratories.

Item 18 of the Category 1 notifiable medical conditions is ‘respiratory disease caused by a novel respiratory pathogen’, examples of which are cited as novel respiratory pathogens including novel influenza A virus and MERS coronavirus.

It is clear from the guidance of the WHO that Covid-19 and the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) which causes it is a respiratory disease caused by a new respiratory pathogen.

The National Institute for Communicable Diseases has published guidelines which state that Covid-19 is classified as a Category 1 notifiable medical condition and was a notifiable medical condition at the time of its outbreak in South Africa and no further government action was required to render infection notifiable.

55

Is it common for insurance policies issued in the country you are reporting on to include a pandemic or virus exclusion? Please give a short description of the legal basis and common insurance practice.

Yes

The pandemic or virus exclusion generally used in insurance policies prior to the Covid-19 pandemic generally was usually as a specific exclusion contained within the disease extension itself and was couched on the basis of specific viruses or disease, such as HIV and AIDS, H5N1 and Avian Influenza. Such exclusions, where worded with reference to specific viruses and diseases, invariably did not operate to exclude SARS-CoV-2 and Covid-19, and more often than not did not make any reference to an epidemic or pandemic. Only a handful of policies issued prior to the onset of the Covid-19 pandemic that we have considered included a general exclusion for pandemics and epidemics.

56

Have any courts in the country you are reporting on determined that a pandemic or virus exclusion is void as against public policy in the context of Covid-19? Please give a short description of the legal basis and relevant jurisprudence.

No

57

Have any courts in the country you are reporting on otherwise determined that a pandemic or virus exclusion is unenforceable in response to Covid-19? Please give a short description of the legal basis and relevant jurisprudence.

No

58

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 in the context of exclusions.

N/A

See the comments that follow relating to Regulatory Oversight.

Regulatory oversight

Yes/

No/ N/A

Additional comments, if any.

59

Have insurance regulators in the country you are reporting on issued directives concerning coverage for claims arising out of Covid-19? Please describe the regulations that have been implemented.

No

No directives or regulations were issued. The relevant South African regulators namely the Financial Sector Conduct Authority (FSCA) and the Prudential Authority (PA) issued guidance in the form of regular communications and press releases, which provided direction to the insurance of the regulator’s expectations in relation to BI-related claims. However, these communications, press releases and guidance notes were not binding on the industry.

On 30 March the FSCA issued FSCA Communication 12 of 2020 (General), which outlined expectations on regulated entities, including that, if any new exclusions or requirements are introduced to insurance policies during the Covid-19 crisis, they must be discussed with the FSCA.

On 12 May 2020, the FSCA and the PA collectively issued Joint Communication 5 of 2020 which set out the Authorities' position on certain aspects relating to Business Interruption insurance in light of Covid-19 and the Authorities' expectations on non-life insurers and intermediaries pertaining to policyholders with BI claims related to Covid-19. In respect of standard BI insurance:

  • Covid-19 in itself will not trigger cover under standard BI insurance policies as it does not cause physical damage to an insured’s premises and the Authorities see no basis to intervene in instances of repudiation of cover.
  • Insurers however are required to clearly communicate exclusions to policyholders and quote the relevant provisions of the policy document.
  • In respect of extension for infectious/contagious diseases the Authorities’ engagements indicate that there is only a small percentage of policies that offers this type of cover and that there are various interpretations in the market as to what the trigger for cover is and how exclusions for pandemics should be applied.
  • The Authorities’ understanding is that cover will only be triggered where the loss of income was due to the business being interrupted as a result of a localised infection of Covid-19. On this interpretation, the insured will not be entitled to claim for loss which solely arose as a result of other related actions such as the national lockdown introduced by government.

On 19 June 2020, the FSCA has published FSCA Communication 34 of 2020 (INS) which set out the position of the FSCA in respect of certain aspects of Business Interruption insurance cover, in particular how BI claims identified into six broad categories should be dealt with. Further, the Communication sets out the burden of proof for each of the categories identified.

On 9 July 2020, the FSCA published a press release titled ‘FSCA stance on Business Interruption insurance cover’, wherein the FSCA had expressed concerns regarding the behaviour of some insurers who were deliberately avoiding paying business interruption claims where no grounds exist to do so and if a policyholder could not find evidence in support of the view that the national lockdown could be a trigger for a valid business interruption claim, where policyholders have satisfied the requirements of their specific policy, they can claim – whether before, during or after the national lockdown.

On 24 July 2020, the FSCA in South Africa published a press release to delineate the outcome of its discussions with insurers that are most affected by business interruption insurance claims. Notably, the Authorities had established principles to be applied as a guide in determining the interim relief payable, such as should the courts find in favour of policyholders, which was provided to a policyholder as interim relief will be deducted from the total claim amount payable to a policyholder by a non-life insurer.

On 11 February 2021, the FSCA published a press release titled ‘FSCA’s current position on Contingent Business Interruption Insurance’ which set out the FSCA’s current expectations of non-life insurers and policyholders in respect of Contingent Business Interruption (CBI) insurance cover and its latest position on certain aspects thereof. The FSCA recorded that those non-life insurers who underwrite CBI insurance cover had confirmed that legal certainty regarding CBI insurance cover in the context of Covid-19-related claims had been obtained consequent to court judgments, and that those non-life insurers would ensure that determinations in respect of claims accord with the courts’ findings in such judgments.

On 12 August 2021, the Financial Sector Conduct Authority (the FSCA) issued a press release titled ‘Update on Contingent Business Interruption claims’. In this regard the FSCA provided guidance, subject to an insurer’s specific requirements, on what may be requested by insurers in order to process CBI claims.

60

Are regulators requiring or encouraging insurers to provide grace periods to insureds to make payments on premiums? If yes, please give a short description of the legal basis and relevant guidance.

Yes

In April 2020, the FSCA published Communication 14 of 2020 – Conduct of Business Supervision (in respect of funeral policies).

The Authority emphasised that insurers and financial services providers should bear in mind the circumstances created by the Covid-19 pandemic and treat policyholders with empathy, flexibility. Insurers were advised to ensure that all customers are treated fairly during the entire product cycle, from advertising to sales, premium collection, claims, renewals and complaints.

Government action

Yes/

No/ N/A

Additional comments, if any.

61

Has the government in the country you are reporting on implemented relief measures for losses sustained as a result of Covid-19?

Yes

C19 TERS

In view of the declaration of national disaster and associated government mandated lockdown, the Minister of Employment and Labour issued a directive called Covid-19 Temporary Employee/Employer Relief Scheme (C19 TERS). The South African government created a special short-term benefit administered by the Unemployment Insurance Fund (UIF) and the UIF Commission as per the Directive Covid-19 Temporary Employee/Employer Relief Scheme.

During this period of lockdown, companies which shut down and employees who are laid off temporarily, compelled to take leave (not out of choice) may apply under the C19 TERS to compensate employees who have lost income (or a portion thereof) due to Covid-19.

UIF benefits were monetary amounts that were capped for higher earners, with a benefit value calculated from a maximum monthly remuneration of ZAR17,712 (approximately US$1,125) per month. The C19 TERS benefit was also calculated to specific periods within the broader lockdown.

Employers may apply on behalf of their employees but the benefit is ultimately paid to the employee.

Debt Relief Finance Scheme

This scheme is for small and medium businesses which are negatively affected, directly or indirectly, due to the pandemic. This facility was a ‘soft-loan’ facility aimed at assisting existing small, medium and micro enterprises (SMMEs) to keep them afloat during the pandemic for a six-month period from April 2020.

Tourism Relief Fund

The Tourism Relief Fund provided one-off capped grant assistance to SMMEs in the tourism value chain to ensure their sustainability during, and post, the implementation of government measures to curb the spread of Covid-19. Capped at ZAR50,000 (approximately US$3,180) per entity, grant funding can be used to subsidise expenses towards fixed costs, operational costs, supplies and other pressure cost items. Accommodation establishments and hospitality and related services, travel and related services all qualified for relief under this fund. Approvals for this funding were controversially tied to the applicant’s Black Economic Empowerment rating, which has since been determined by the SCA to have been unlawful.

Social Relief of Distress (SRD) grants

Grants in terms of the Special Covid-19 Social Relief of Distress amount were given at R350 (approximately US$22) per month per qualifying individual.

62

If the answer to the above question is yes, are the relief measures available to both individuals and businesses?

Yes

See response to Question 61.

63

Briefly describe the types of relief measures available to individuals and businesses.

Yes

See response to Question 61.