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Government did not interrupt my business with the Lockdown Regulations – COVID19 did: Time to pay up

  • South Africa
  • Other


In light of the Covid-19 outbreak, and the consequent national lockdown, many businesses have experienced a direct loss in profits due to lockdown restrictions imposed by the government. As a result, many businesses were and still are unable to turnover any profit for this period. Although the staggered return to business may enable a phased recovery of the economy, it does not alleviate the loss of profits already suffered by businesses and it may still be some time before businesses can return to operating at full capacity.

To curb the financial loss sustained by businesses, business owners are encouraged to turn to their insurance policies and determine whether they are covered under business interruption. Business interruption is designed to compensate businesses for the financial impact of the interruption/interference as a result of listed key external events, such key external events can include a pandemic such as Covid-19.

With the large influx of claims following the national lockdown, some insurance companies have decided to reject such claims. The basis of the rejection: the business interruption was caused by the Lockdown Regulations that were promulgated to prevent the spread of Covid-19, and not the pandemic itself. The Western Cape High Court, however, has recently rejected such an argument in the matter of Café Chameleon CC v Guardrisk Insurance Company Ltd. The court found that, but for the Covid-19 outbreak, the interruption or interference to the business would not have occurred and that Covid-19 was the reason for the Lockdown Regulations.

Businesses are therefore urged to review their insurance policies to identify, firstly, whether they have business interruption insurance and, secondly, whether their policies list, for example, pandemics, infectious and contagious diseases and/or notifiable diseases as events that trigger a claim. Should this be the case, businesses must submit their claims as soon as possible, in accordance with the claim’s procedure.

Given the huge financial impact this is going to have on insurance companies going forward, it is likely that many insurance companies (where permitted), will vary the policies to exclude losses caused by pandemics, infectious and contagious diseases and/or notifiable diseases, in the future.

We are available to assist in reviewing and giving advice/opinions on whether your insurance policy provides coverage to your business and whether you have a valid claim against your insurance company. Similarly, if your claims have been rejected by your insurance company, we are available to assist you in determining whether there are lawful grounds on which to substantiate your claim.