[Column] Mthokozisi Maphumulo: Business insurance policies to rescue business amid the recent unrest and looting in South Africa
The recent events of unrest and looting of shops in South Africa, 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.