(4 minutes read)
· The high court in Cape Town said that the insurance companies should have been making fast payments to businesses with policies that cover losses due to a viral outbreak
· Highlighting the need for following ethical business practices, the court said that an insurance clients be able to claim an interim payment in order to survive as a business
· However, the court said that was confined to whether there is a legal basis by which to make such an award
The high court in Cape Town said that the insurance companies should have been making fast payments to businesses with policies that cover losses due to a viral outbreak. The Court has come heavily on insurance companies’ dilly dallying with payments on one pretext or the other. The catch, however, is that legally the insurance companies can’t be forced to do so if there is no specific provision to that effect in the binding contract.
Highlighting the need for following ethical business practices, the court said that an insurance clients be able to claim an interim payment in order to survive as a business. However, the court said that was confined to whether there is a legal basis by which to make such an award.
The Court was ruling on a claim of R17.6 million of Cape Town based Luggage Glove and associated company Interfax against Old Mutual under a “business protection” clause in an insurance policy. The companies had claimed R4.84 million as an interim payment. This would work out slightly more than half of the six months it is insured for. That insurance taken by the company covers loss of gross profits for up to six months. The company had paid its premiums and filed a proper claim under cover that includes losses due to infectious or contagious disease.
As a defense, the insurance company Old Mutual picked on the policy wording which restricts coverage to a 50 kilometre radius and argued that it was not liable to pay up for a disease outbreak on a national scale that leads to a nationwide response. The court did not buy this argument saying that many insurers have shown themselves loathe to pay up where they do.
