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South Africa: COVID-19 related insurance claims and coverage: resolving the coverage disputes

In our recent article, we considered the arguments both for and against insurance coverage, relative to potential Coronavirus (COVID-19) related losses and liabilities, and stressed the importance of the legal interpretive process in determining coverage. 

A number of these arguments have been echoed in the recent decision of the Western Cape High Court in the case of Café Chameleon CC v Guardrisk Insurance Company Ltd. In this case, the court had to decide whether there was cover under the business interruption section of an insurance policy, for loss suffered “as a result of the interruption caused by the COVID-19 pandemic and the resultant promulgation and enforcement of the lockdown Regulations under the Disaster Management Act.” The court confirmed and applied the legal interpretive process in its assessment of coverage under the policy and in finding that the loss fell to be covered.

While the decision has been appealed, the appeal has the effect of suspending the operation and execution of the court’s decision, it is nevertheless useful to consider the arguments raised and the position taken by the court in this matter. The arguments, both for and against cover, are likely to be developed and refined on appeal and indeed in similar matters before our courts.

The relevant policy wording

The business interruption section of the policy provided cover for loss as a result of “interruption or interference with the business due to (e) notifiable disease occurring within a radius of 50 km of the premises”. 

The policy defined “notifiable disease” to mean “illness sustained by any person resulting from any human infectious or human contagious disease, an outbreak of which the competent local authority has stipulated shall be notified to them, but excluding Human Immune Virus (H.I.V), Acquired Immune Deficiency Syndrome (AIDS) or an AIDS related condition”. 

Insurer’s arguments on policy coverage

In relation to coverage and the policy requirements, the insurer admitted that COVID-19 is a human infectious or contagious disease, and that an outbreak of COVID-19 had occurred within 50 km of the restaurant as contemplated in the policy.

In arguing that there was no cover, the insurer:

  • denied that the loss suffered was covered under the notifiable diseases extension clause in the policy on the basis that the restaurant had failed to demonstrate that a competent local authority had stipulated that COVID-19 shall be notified to it;
  • denied that the loss suffered was due to or caused by a notifiable disease, as contemplated by the policy on the basis that the business was interrupted by Regulations promulgated (by the national government) to prevent the spread of COVID-19 and not because of the presence thereof in any particular area; and
  • denied that the policy was intended to cover the losses that the restaurant may have suffered, as borne out by the fact that there were “several types of insurance cover available in the South African insurance market” that would have offered such cover, but the restaurant had elected not to obtain such cover, and “the fact that the Notifiable Disease Clause in the policy is ‘free cover’ and no premium is charged”.


The court

The court confirmed the legal interpretation process to be applied to insurance policies, and held that:

“an insurance policy has to be interpreted so that its provisions receive fair and sensible application and that a restrictive consideration of words without regard to context has to be avoided... The Policy under consideration must therefore be considered on the contractual terms to which both parties had assented to, in a sensible manner which underpins sound commercial sense, and not have an un-business-like result”.

In the court’s view, and in accordance with the legal interpretation process that it had outlined, COVID-19 fell substantially within the ambit of the Notifiable Disease Extension. It did not matter that the source of the obligation was national legislation (the National Health Act), as opposed to a local authority ordinance, by-law or other subordinate legislation as “the principal reason why the notification requirement was introduced into the Notifiable Disease Extension, was to ensure that cover thereunder would be triggered by outbreaks of the most serious diseases …”. This interpretation accorded with “sound commercial principles and good business sense” ensuring that “the provisions receive fair and sensible application”. 

In considering the issue of causation, the court considered whether COVID-19 “caused or materially contributed to the ‘Lockdown Regulations’”, which Lockdown Regulations in turn caused the business interruption loss. The court applied both the factual and legal causation tests:

  • To determine factual causation, the court asked whether “but for the COVID-19 when the Lockdown Regulations were promulgated”, and held that:

“there is indeed a clear nexus between the COVID-19 outbreak and the regulatory regime that caused the interruption of the Applicant's [insured’s] business”.


  • In relation to legal causation, the court confirmed that: “In determining the presence of legal causation, the question is whether, having regard to the considerations alluded to, the harm is too remote from the conduct or whether, it is fair, reasonable and just that the Respondent [insurer] be burdened with liability”, and found that the insurer was liable.
  • In doing so, the court dismissed the argument raised by the insurer that the policy was not intended to cover the losses that the restaurant may have suffered, holding that “It cannot be that the Policy under consideration must be interpreted with reference to other policies or on the basis of generalised concerns about the impact of COVID-19 on the insurance industry at large, of which the [insured] had no knowledge of”.


As mentioned, this decision has been taken on appeal, and accordingly the insured applicant’s rights to enforce the judgment and require payment (including interim payments) from the insurer under the policy have been suspended until the decision of the appeal court. It is also possible that the decision of such appeal court may itself be appealed, and ultimately that the matter will be referred to the Constitutional Court. It may take an indeterminable length of time before there is a final and enforceable decision, and importantly before the Insured will receive any payment in terms of the policy.

Given the various and different policy wordings in the market (albeit similar) and underlying factual differences in claims, this judgment cannot be regarded as a general precedent for the settling of business interruption claims.  In addition to these factors, the complexities relative to the interpretation of policy wordings and resultant controversial views and approaches, may mean that the final resolution of business interruption claims is likely to play out through a myriad of legal cases well into the future.

Similarly, for these reasons and the differences in the interpretative process, the outcome of the expedited legal proceedings underway in the United Kingdom (instituted by the Financial Conduct Authority (the Regulator), in the stead of policyholders, for clarity in relation to the cover afforded by selected business interruption insurance policies), may not serve to give adequate assistance or direction to the interpretation of business interruption policies in the South African context.

In our view, it is imperative, and in the interests of both the insurance industry and policyholders, that an expeditious route or process be found in order to bring a finality to the business interruption claims in the South African context in the shortest possible timeframe. This possibility would require exploration by, and agreement between, all parties involved.  We are currently in the process of exploring such a possibility within the context of an alternative dispute resolution mechanism.


Rob Scott

Dispute Resolution | Executive

+27 83 408 6751


Zara Sher

Dispute Resolution | Senior Associate

+27 82 310 3859