Cash-strapped Cathedral Peak Hotel may close if insurer doesn’t pay

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The well-known Cathedral Peak Hotel in the Drakensburg, a family owned business in existence for 81 years, has taken to social media in an effort to exert pressure on its insurer to pay out on its ‘business interruption’ insurance cover.

In their Facebook post published on Friday 26 June – which has subsequently attracted nearly 1 000 comments and almost 5 000 shares – owners William and Belinda van der Riet say “we are in a dire financial situation with the real possibility of not being able to reopen our doors unless we receive financial aid in the very near future”.

They continue: “Our 81-year-old business employs 200 staff, most of whom support large families locally. We ask you, as our valued guests and followers, to please spread the word in support of our claim to ensure that Cathedral Peak Hotel can continue to operate for many generations to come.”

POLICY IS BELIEVED TO COVER ‘NOTIFIABLE DISEASE’
At the heart of the matter, contend the Van der Riets, is the policy that the hotel took out in 2005 that had ‘business interruption’ wording which included loss of profits following a ‘notifiable disease occurring within a radius of 50 kilometres of the premises’.

“During February 2020 when the COVID-19 virus was becoming a reality, we were reminded by our insurance brokers that we had the best possible BI coverage available in the market and that according to [our] policy wording, COVID-19 qualified as a ‘notifiable disease’,” the hotel’s post reads.

INSURER SAYS LOSS IS DUE TO THE GOVERNMENT LOCKDOWN
“Despite lodging our claim five days before the national lockdown, over three months ago, [the insurance company] is still resisting admitting their obvious liability to us by stating that our losses are not as a result of COVID-19, but due to a government enforced lockdown.”

While the insurer is named in the Facebook post, The South African has chosen to omit it as, due to the timing of the article, we are unable to offer the insurance company reasonable right of reply.

OTHER HOSPITALITY BUSINESSES HAVE SIMILAR ISSUES
A number of hospitality businesses such as hotels, guest houses and restaurants have experienced similar difficulties, with insurers apparently denying claims as the losses are due to government action in the form of the lockdown – which is not an insured risk.

In other instances, there have been reports of insurers also denying business interruption claims as they define ‘interruption’ as being due to a physical event such as fire or flood.

Recently, Insurance Claims Africa chief executive Ryan Woolley told Cape Talk that the consultancy is ready to act on behalf of around 400 claimants in tourism and hospitality. He is hoping, though, that the dispute can be settled through compromise rather than expensive litigation.

WARNING THE TOURISM SECTOR FACES A SEVERE CRISIS
“The tourism sector is facing a severe crisis with a lot of insurance companies turning their backs on the policies and reneging on the contracts, saying ‘we were happy to take the premiums but we’re not going to pay your claims’,” he said in an interview with The Money Show.

“Insurance has basically designed a product specific to the tourism industry that gives them extensions to their business interruption policy – one of them a notifiable disease – something that Covid-19 qualifies as…”

“What the insurance [sector] is now trying to do is cleverly sidestepping the issue, saying COVID-19 is not causing the losses – it is the government lockdown,” Woolley explained.

southafrican.com

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