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COVID-19 South Africa: FSCA update on intended legal process in respect of contingent business interruption cover

  • Market Insight 16 September 2020 16 September 2020
  • Africa

  • Coronavirus

On 15 September 2020 the Financial Sector Conduct Authority (“FSCA”) issued a letter (“the Letter”) to all non-life insurers in respect of contingent business interruption cover (“CBI cover”) in respect of COVID-19 related claims. Please click here to view the Letter.

In the Letter the FSCA refers to its previous suggestion of an intended legal process to obtain legal certainty on certain elements of CBI cover (“the intended legal process”). The intended legal process, which was submitted to non-life insurers for commentary on 7 August 2020, consisted of inter alia the FSCA bringing an application for a declaratory order in respect of specific elements of CBI cover in the context of COVID-19 claims. To read more about the intended legal process click here.

In the Letter the FSCA records that the majority of the commentary it received from non-life insurers in respect of the intended legal process indicated that the cases presently pending in South African courts (“the pending cases”), as well the test case of the Financial Conduct Authority in the United Kingdom (“the FCA case”) would provide the necessary legal certainty in respect of CBI cover.

On this basis the FSCA decided not to pursue the intended legal process until such a time that the pending cases and the FCA case have been determined and that it would then reassess whether the necessary legal certainty has in fact been obtained on all the elements in respect of CBI cover and the various permutations of the policy wordings. Should there at that point be elements of CBI cover that have not been adjudicated upon, the FSCA will then engage with the non-life insurance industry and discuss the best manner through which to clarify any uncertainty.

The Letter also records that the FSCA is aware of the judgment in the FCA case which was handed down on 15 September 2020, and that it is in the process of considering it. To access a copy of the judgment in the FCA case please click here.

There are nuances to the lead sample wordings that were considered in the FCA case that influenced the outcome. The judgment in the FCA case will, with this borne in mind, need to be carefully considered to reflect on the impact on local COVID-19 related CBI claims.

Should you require further information regarding the Letter, the judgment in the FCA case and the impact thereof on CBI cover, please contact Ernie van der Vyver, Amelia Costa, Tony Hardie or Daniel le Roux.  

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