What that means for the hospitality industry

A recent High Court judgement has set a significant precedent and sent the hospitality industry reaching for the champagne bottles. Judge Andre le Grange ordered insurer Guardrisk to pay out a Cape Town restaurant’s business interruption claim to the applicants, Café Chameleon. The High Court ruled that Café Chameleon’s loss due to the Covid-19 outbreak is legal cause for the insurer to pay out the claim.

According to attorney PJ Veldhuizen, Managing Director of Gillan & Veldhuizen Incorporated, who represent a number of major SA restaurant and hospitality groups, it’s “too soon to pop the champagne, but its definitely first blood for the hospitality industry.”  Summarizing the judgment, Veldhuizen explained that Judge le Grange sets out the matter in 4 important categories.

  1. He acknowledged the urgency of the matter – to wait out for normal court proceedings to be heard would be futile as any further delay leads the business closer to liquidation and therefore renders the case pointless.
  2. He restated the positions of the Supreme Court of Appeal and the Constitutional Court that the principles of interpreting contracts should be to provide interpretation in a business-like manner.
  3. He confirmed that the claim met the tests for factual and legal causation.
  4. He ruled that COVID-19 – and not the Government lockdown – is the cause of the loss.

Veldhiuzen is of the opinion that the ruling has a strong chance of withstanding an appeal and that businesses must trust that the courts will give the matter the urgency that has been recognised. Delaying the process will result in a futile court application and a possible flurry of liquidations. He also comments that the ruling has “blown up every lawyer and broker’s telephones and it may open the floodgates of some insurers – of course, depending on the particularity of the clause in the original insurance policy.”

Before running off to court, insured businesses should check their insurance policies and/or agreements for inclusion of the ‘extension cover for infectious and notifiable diseases or pandemics’ clause or similar.