Business interruption non-damage extension insurance indemnity periods

Donald Dinnie, Norton Rose Fulbright

In this judgment,  the court held that the indemnity period applicable to the relevant non-damage business interruption extension of the policy was eighteen months and not three months as contended for by the insurer.  The judgment is fact specific and turns on the policy wording and structure.

It establishes no new principles.  The court applied the approach to interpreting insurance contracts as stated in Centriq Insurance Company Limited v Oosthuizen and Another.

The court held that having regard to the text, the context, and the purpose of the policy and the schedule, the indemnity period in relation to claims for loss of revenue due to business interruption was 18 months. The court said that those conclusions were cohesive and made business sense.

Given that the policies were admittedly difficult to navigate and assuming at best for the insurer there was, according to the judgment, a meaningful degree of uncertainty concerning the indemnity periods, the conclusion “might be reached that on that aspect the policies are ambiguous” and in that context the court said that the contra proferentem rule would be applied to interpret the policy against the insurer. It was not therefore necessary to engage in a debate as to whether the indemnity period was a limitation or not and should be restrictively interpreted.

Nor did the court engage in discussion about the insurer’s criticism of the High Court’s description of insurance policies being a social safety net.  The same court did say late last year in this case.

“… the recent statement in Ma-Afrika Hotels and Another v Santam Limited [2020] ZAWCHC 160 para 74, does not accord with our law. It reads: ‘Insurance is intended to serve as a social safety net to cover financially devastating losses and compensate injured parties. This is precisely the safety net required as a result of the unprecedented Covid- 19 pandemic.’

Policies often evolve over time.  Extensions and memoranda are added and removed.  Insurers and intermediaries should regularly review their policy wordings as read with the schedules issued to ensure consistency in language and terminology used throughout the policy and structure.

First published by: Financial Institutions Legal Snapshot