CLAIMS FOR BUSINESS INTERRUPTION CAUSED BY THE COVID-19 LOCKDOWN.

The case of Café Chameleon CC v Guardrisk Insurance Company Ltd (5736/2020) [2020] ZAWCHC 65 (26 June 2020) – a small Café took on an Insurer for payment of losses incurred during the Lockdown period.

This judgement, handed down by Le Grange, J on 26 June 2020, may provide some form of guidance, clarification and precedence in cases where businesses in the hospitality sector struggle to get the pay-outs for Business Interruption (BI) insurance claims.

Café Chameleon brought an application, on an urgent basis, in which it sought relief in the form of a declaratory order that Guardrisk Insurance indemnify it as policyholder for loss suffered as a result of the interruption caused by Covid-19 and the subsequent Regulations under the Disaster Management Act 57 of 2002 as well as further interim payments for the survival of the business during these interruptions.

Guardrisk Insurance opposed this application on the grounds, amongst others, that the loss suffered by the Applicant is not insured under the Infectious Diseases Extension clause of the policy and that a causal link does not exist between the Lockdown Regulations and the Infectious Diseases Extension.

Guardrisk Insurance argued that the business of the Applicant was interrupted by the Lockdown Regulations which are aimed at preventing the spread of Covid-19 and not as a result of the presence thereof in the particular area and therefore the claim does not fall within the insuring clause of the Policy.

The court held that the Lockdown Regulations were implemented because of the Covid-19 pandemic which falls within the ambit of a notifiable disease which the insurer covered. Le Grange, J held that “It is difficult not to accept that there is indeed a clear nexus between the Covid-19 outbreak and the regulatory regime that caused the interruption of the Applicant’s business.”

The Court found that the Respondent is liable to indemnify the Applicant in terms of the Business Interruption section of the Policy for loss suffered from 27 March 2020 as a result of Covid-19 which lead to the promulgation and enforcement of the Lockdown Regulations under the Disaster Management Act and ordered that the Respondent pay the costs of the Applicant in this application.

You can read the full judgement here.

Should you find yourself in a similar situation, kindly feel free to contact Andre Pienaar and Associates who specialize in this area of law