Nic Viviers
21 April 2020

While the human suffering and the spread of COVID-19 continue to make headlines, the economic consequences thereof will be severe and adversely affect the bottom line of many businesses.

Fortunately, business owners, may have insurance cover enabling them to claim from their insurance companies because of the interruption and consequent stoppage, during lockdown, of their businesses.

On 23 March 2020, President Ramaphosa informed the public of South-Africa that a nationwide lockdown would be enacted in terms of the Disaster Management Act, 2002. The lockdown commenced on 26 March 2020 and was set to end on 16 April 2020. On 9 April, as we know, the lockdown was extended to 30 April 2020. It remains to be seen, at this point in time, whether there may be a further extension thereof.

Many businesses will have business interruption insurance which at first glance might create the impression that the economic blow of COVID-19 could be lessened.

Business interruption insurance normally indemnifies against losses brought about by the inability to continue normal business operations due to a hazard or peril ‘insured against’, such as a fire or storm that causes physical damage to a business premises. It allows a business to recover profits lost during the time reasonably necessary to restore or repair the business premises.

The question that arises is whether COVID-19 qualifies as an insured event which would allow for a valid and enforceable insurance claim. The answer to this question is dependent on the wording contained in the contract of insurance entered into between the insured and insurer and perhaps more specifically, the perils or insured events for which your insurance company assumed the risk of loss.

Some businesses will not enjoy cover or indemnification as standard cover in policies is only triggered when there is physical damage to the insured’s property which results in business interruption. There is some debate as to whether contamination of a property constitutes physical damage. The last word in this regard has certainly not yet been spoken. Unless an insured is therefore able to prove the presence of the COVID-19 virus on the premises, it is unlikely that the business interruption resulted because of physical damage to property.

However, some business interruption policies include extended cover for notifiable diseases, denial of access to property or loss of a specific attraction attached to the business. In such instances, claims could be successful but would be very fact specific. Cover may be conditional upon a positive occurrence of the disease (i.e. a person testing positive for the COVID-19 virus) within a specific radius of the business premises or a specified tourist attraction from which business income is derived. An example of the latter situation would be where a tour operator/lodge has specifically listed the Kruger National Park as its main attraction which then became inaccessible due to the national lockdown.

Business owners should be mindful that an insurance policy almost always requires prompt notice of any claim. The duty to report a claim is normally triggered when the circumstances known to the insured business owner would suggest to a reasonable person that a claim might be possible. Accordingly, business owners should review their policies now and consult with his or her attorney to institute a claim, where possible, for the losses suffered.