All tied up in knots | Santam vs Ma-Afrika Hotels



Insurance Law


On Thursday, 08 October 2021, short-term insurer, Santam lost an appeal against a decision by the High Court (Western Cape) that it must pay out contingent business interruption claims to Ma-Afrika Hotels and Stellenbosch Kitchen for the full 18-month period covered in their insurance policies.

After Santam argued that its policy wording meant it was only liable to pay out for three months, the Supreme Court of Appeal berated the insurer for its attempts to avoid liability through their series of “twisted and turned” policy arguments.

The judgment is detailed and gives a very good and sensical approach to the purpose of insurance cover; what the reasonable insured would expect; and the difficulties that arise when insurers craft overly complicated policies and insurance schedules.

The more complex the construction of the contracts, the greater the chance of internal ambiguity and contradictions. Consequently, the courts are bound to favour the insured and give the benefit of the doubt and confusion to them. A plain language approach in constructing policies is far favourable and care should be taken to properly vet the contracts and schedules. Product designers and actuaries who craft these documents may understand them, but in the end, the lawyers and members of the public should be able to comprehend them too.

Important lessons can be taken from this judgment and together with the referenced recent judgments, constitute a massive and valuable evolution of the jurisprudence on the complexity of insurance contracts.

Would you like to discuss this article with me?