Covid-19 South Africa: Can Business Rescue save your company from the impact of lockdown?
On 19 June 2020, the Financial Sector Conduct Authority ("FSCA") has published FSCA Communication 34 of 2020 (INS) ("Communication") which sets out the position of the FSCA in respect of certain aspects of Business Interruption ("BI") insurance cover, in particular how BI claims identified into six broad categories should be dealt with.
Following extensive concerns raised by many affected stakeholders, which concerns mainly centre around the numerous policy wordings in the market and the different interpretations of such wordings and requirements to prove a valid claim, the FSCA requested the industry to provide it with copies of BI insurance wordings with extensions for infectious and/or localised diseases, for the FSCA to analyse and to classify such wordings.
In the Communication the FSCA indicates that it found no evidence in support of the view that the National lockdown could be a trigger for a valid BI claim and is thus of the firm view that the National lockdown was not intended and cannot reasonably be interpreted to be a trigger for BI insurance claims.
In addition, the FSCA has now broadly grouped the BI wordings into six different categories, namely:
Further, the Communication sets out the burden of proof for each of the categories identified. In this regard, the FSCA provides the following guidance to insurers in respect of the burden of proof, namely, insurers should:
The Communication is merely a communication and is not binding on insurers.
However the FSCA has encouraged all insurers affected to deal with BI insurance claims in line with this Communication and has stated that to the extent any insurers do not deal with BI claims in accordance with the Communication, the FSCA will issue a binding directive to such insurers in terms of section 144(1)(b) of the Financial Sector Regulation Act, 9 of 2017 ("FSR Act") to comply with the Communication.
Any insurers who are directed by the FSCA to deal with BI claims in terms of section 144(1)(b) of the FSR Act, may appeal to the Financial Services Tribunal and take any decision of the Financial Services Tribunal on review to the High Court.
The Communication notably states that any insurer which holds a view contrary to that expressed by the FSCA in the Communication, should inform the FSCA of its view and the basis upon which this view was formed as a matter of urgency.
We suggest that insurers consider their policy wordings for purposes of categorisation thereof, assess the requirements as set out by the FSCA and the burden of proof in respect of each.
In the event that you require further information regarding this Communication and the impact of such on BI insurance cover, please contact Ernie van der Vyver, Tony Hardie, Daniel Le Roux or Amelia Costa.