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Do you own a business? Has your business been interrupted by COVID – 19? Are you insured for business interruption?
If you answered yes to the above questions, then if you haven’t already, you may want to consider submitting a claim to your insurer for the losses your business sustained as a result of the COVID – 19 Pandemic as it was recently held in the case of Café Chameleon v Guardrisk (5736/2020) [2020] ZWACHC 65 that insurers may very well be liable to indemnify their insureds for these claims (read more….)

The Case

Café Chameleon (“CC”) is a restaurant in the Western Cape. CC launched an urgent application seeking a declaratory order that Guardrisk (its insurer) was obliged to indemnify it in terms of a Business Interruption clause in the insurance policy between the parties. 

CC, primarily a sit-down restaurant, alleged that:

  • It had suffered losses as a result of the interruption caused by the COVID-19 pandemic and the nationwide lockdown imposed by the Regulations under the Disaster Management Act, 2002 (“the Act”).

  • As a result of the restricted movement and shut down of various businesses in terms of the Regulations under the Act, it, being a restaurant, sustained significant financial losses as it could not trade or receive customers during the lockdown period.

  • Although the Regulations were relaxed to allow for the preparation and delivery of prepared food, as it is primarily a sit-down restaurant, income generated from food deliveries only amounted to 5% of its turnover.

    CC submitted its claim under the Notifiable Diseases Extension clause in terms of the insurance policy, which provided business interruption cover for “a notifiable disease occurring within a radius of 50km of the premises”. 

    In terms of the insurance policy, a notifiable disease was defined as an ‘illness sustained by any person resulting from any human infectious or human contagious disease, an outbreak of which the competent local authority has stipulated shall be notified to them, but excluding HIV, AIDS or an AIDS related condition’.

    Guardrisk denied liability on several grounds, such being that; (1) to allow such a claim would potentially open the floodgates to all insureds who have Business Interruption claims which has the potential to cripple the insurance industry if insurers are liable to pay these claims; (2) As there was no obligation to notify the local authority of the  outbreak of Covid-19, the illness could not be said to fall under the definition of a notifiable disease as defined in the policy; and lastly that; (3) The loss suffered by CC was not covered under the policy as the direct cause of the loss was the lockdown imposed by the Regulations and not the COVID-19 pandemic.

    The Court ultimately disagreed with Guardrisk and held that; (1) the insurance policy must be interpreted so as to ensure that its provisions receive fair and sensible application having regard to the context and a business-like or commercially sound result is achieved; (2) the policy cannot be interpreted with reference to other policies or based on generalised concerns about the impact of COVID-19 on the insurance industry and that the argument of opening the floodgates of liability cannot be upheld because each case must be decided upon its own facts; (3) although COVID-19 was determined as a notifiable disease by national government and not a local authority, this fact was ultimately irrelevant as it is clear that the illness was a notifiable disease; and (4) That in regard to the issue of causation:

  • insofar as factual causation was concerned, the “but for” test applied and in applying the said test, there was a clear nexus between the COVID-19 outbreak and the Regulations which caused interruption to the business of CC; and

  • insofar as legal causation was concerned, the Court held that the harm was not too remote from the peril that CC was insured against and that it was fair, reasonable and just that Guardrisk be liable to indemnify the insured in this instance.

    The Court accordingly held that Guardrisk was liable to indemnify CC.

    Guardrisk has since taken the matter on appeal but the appeal has not yet been heard. There is also another similar case involving Santam which is due to be argued in September 2020.


As this case was heard in the Western Cape High Court, it is only persuasive and not binding on other Courts in different regions unless the judgment is upheld by the Supreme Court of Appeal.

That having been said, this case is still good news for insureds who have business interruption cover as whilst it is evident from the judgment that each case must be determined in light of the specific facts and specific policy wording in each case, a precedent (especially in matters in the Western Cape and where the policy wording and facts are similar to the Guardrisk case) has now been set and unless Guardrisk is successful with its appeal, the judgment will remain so.

It is also worth noting that this case seems to have made some insurers think twice about their stance in regard to these claims as some insurers have recently started paying interim relief to some of their small to medium sized insureds in respect of these claims.

It is our view that insureds are, at least for the time being, able to and should consider submitting claims against their insurers for losses based on business interruption if they have the appropriate cover in place and the policy wording and facts are similar to those in the Guardrisk case.