South Africa:

Insurance Law: Business Insurance Policies To Rescue Businesses Amid The Ongoing Unrest And Looting?


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The ongoing events of unrest and looting of shops around the
country, particularly in KZN and Gauteng have certainly been
worrying for business owners. Businesses have had their
properties maliciously destroyed; set alight; plundered;
broken into; etc. Moreover, these acts are not limited to certain
types or sizes of businesses but ranges from small to
large business; from cars to trucks; liquor shops; furniture
stores; food outlets; supermarkets; etc. In some
instances, various types of businesses are destroyed in a
single incident (for example, where a mall is set
alight). The significance of these incidents from
an insurance law perspective is that there are many
insurance companies that will be affected by these incidents. These
incidents are bound to trigger business insurance policies.
The relevant business insurance policies in this
regard may include instances where a business is insured
for – damage or destruction to commercial property; theft of
stock; loss of income; business interruption; fire; violent
protests; damage to tools of trade; etc. In most cases, more than
one policy clause will be triggered. If an insurer
repudiates your business insurance claim, it is crucial that you
seek the necessary legal advice from insurance law experts as the
(in)validity of your claim may determine whether you remain in
business or you close down. 

If an insured peril ensues, it is vital
that a business owner (or the relevant personnel) informs
the insurer immediately. This is because the insurer will need to
conduct relevant assessments and evaluations to determine the
nature and the extent of damage. Thus, delays in reporting claims
should be avoided by all means possible. Further,
this avoids issues associated with time barring clauses which are
common in insurance policies. Secondly, the policies
should be up to date and valid at the time
when an insured peril materialises
. While this may
sound simple enough, there are instances where it may not be so
apparent whether a valid insurance contract had been concluded. In
those cases, businesses should seek legal advice,
accordingly. An insured business needs to
disclose all the material facts and factors relevant
to a claim. This is because insurance policies are based
on honesty (i.e. bona fide). Importantly, only the
relevant material facts and factors need to be disclosed. The
relevance and materiality is determined by the facts and
circumstances of each case. Sometimes,
businesses are insured with various insurers (for
various risks) – in those cases it is crucial that businesses
report the incidents to all the relevant insurers and lodge their
claims, consequently.

When lodging or submitting a business insurance claim, it is
important for businesses to know that they do not have to provide
or to know everything requested or asked from them. It is
an embedded legal principle in our law that the insured needs to
provide enough details. What is
enough in each case will be determined by the merits of
each case. Our courts have frowned upon the tendency of insurers
requiring “unnecessary details” about the
incident so as to find a loophole and avoid
paying/repairing in line with the insurance policy terms. In
addition, our courts have favoured a purposive approach to
insurance repudiations i.e. the primary purpose of the
policy is to compensate the business if and
when an insured peril materialises and that purpose
should override any other trivial factor on which the
repudiation is based. This principle has recently been engraved by
the Supreme Court of Appeal in King Price v Concise
Consulting Company
 case. 

In some cases, insurers repudiate claims in their entirety, and
in some, they partially repudiate (where they believe the business
partly contributed to the occurrence of the insured risk or loss).
Whether the repudiation is in toto or partial,
it is of utmost importance that businesses do exhaust all the
available platforms available to them in order
to hold insurers responsible as per their policies. Seeking
legal advice is crucial as some technicalities may seem, on the
face value, enough to justify repudiation whereas there may be
another legal basis on which the repudiation should not
stand. 

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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