THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 632/20
In the matter between:

GUARDRISK INSURANCE COMPANY LIMITED         APPELLANT
and
CAFÉ CHAMELEON CC                                                    RESPONDENT

Neutral citation: Guardrisk Insurance Company Limited v Café Chameleon
CC (Case no 632/20) [2020] ZASCA 173 (17 December
2020)
Coram:
CACHALIA, SALDULKER and MBHA JJA and LEDWABA
and EKSTEEN AJJA
Heard:
23 November 2020
Delivered: This judgment was handed down electronically by circulation to the parties'
representatives by email, publication on the Supreme Court of Appeal
website and release to SAFLII. The date and time for hand-down is deemed
to be 09:45 on 17 December 2020.
Summary: Insurance law – contract providing cover for loss resulting in
interruption of business for notifiable disease occurring within 50 km of
business premises – whether Covid-19 pandemic contemplated – whether
government response imposing national lockdown part of the insured peril –
whether national lockdown causally linked to local occurrence of disease.

_____________________________________________________________
ORDER
_____________________________________________________________
On appeal from: Western Cape Division of the High Court, Cape Town
(Le Grange J, sitting as court of first instance):

Paragraphs 2 and 3 of the order of the court a quo are set aside. Save as
aforesaid, the appeal is dismissed with costs, including the costs of three
counsel.
_____________________________________________________________
JUDGMENT
_____________________________________________________________
Cachalia JA (Saldulker and Mbha JJA and Ledwaba and Eksteen
concurring)

Introduction
[1] The respondent, Café Chameleon CC (Café Chameleon), operates a
restaurant in Cape Town. Its business, along with many other businesses,
suffered a substantial, as yet unquantified, loss of income following the
outbreak of the Covid-19 pandemic. The loss arose from the interruption of
its business due to the government having instituted a national lockdown in
response to the pandemic. Café Chameleon has an insurance policy
underwritten by the appellant, Guardrisk Insurance Company Limited
(Guardrisk). The policy indemnifies it against loss from business interruption
due to notifiable diseases. Covid-19 is a notifiable disease as envisaged in the
‘Regulations relating to the Surveillance and Control of Notifiable Medical

Conditions’ (the Surveillance Regulations)1 promulgated under the
National Health Act 61 of 2003 (the Health Act). Café Chameleon says the
policy gives it cover for the loss it sustained as a result of the lockdown.
Guardrisk believes the indemnity does not extend to the circumstances of this
case.

[2] Café Chameleon thus sought a declaration in the Western Cape
High Court that Guardrisk was liable to indemnify it for any loss since
27 March 2020, arising from the interruption of its business due to the
lockdown. It also sought other incidental relief, including an order that
Guardrisk make interim payments in respect of its losses calculated and
quantified from time to time. The court a quo (Le Grange J) granted
Café Chameleon all the relief it had initially asked for, but granted Guardrisk
leave to appeal to this court.2 It appears that the learned judge inadvertently
overlooked that Café Chameleon had abandoned the incidental relief during
the hearing. The appeal thus concerns only the declaratory order.

The Essential Dispute
[3] It is helpful to describe the essential dispute between the parties before
setting out the factual background and terms of the policy. The clause
(the infectious diseases clause) that is the subject of this dispute indemnifies
the insured for “loss . . . resulting in interruption (of) the business due to
notifiable [disease] occurring within a radius of 50 km of the premises”.
Under the ‘special provisions’ of the policy, a notifiable disease means “. . .

1 ‘Regulations relating to the Surveillance and Control of Notifiable Medical Conditions, GN 1434, GG
41330, 15 December 2017.’
2 Café Chameleon v Guardrisk Insurance Company Ltd [2020] ZAWCHC 65; [2020] 4 All SA 41 (WCC).

illness sustained by any person resulting from any human infectious or human
contagious diseases, an outbreak of which the competent local authority has
stipulated shall be notified to them . . .”.

[4] Café Chameleon’s position is that once it is accepted that there were
occurrences of Covid-19 in Cape Town, within 50 km of its business, the
government’s response to it through the imposition of a national lockdown
was part of the insured peril covered by the infectious diseases clause.
Guardrisk maintains, on the other hand, that the government’s generalised
response to the pandemic is not what is covered; what is covered is a public
health response aimed only at local occurrences of the disease within 50 km
of the business. I shall consider these contentions in more detail later in this
judgment.

The Factual Background
[5] The first cases of Covid-19 were reported in KwaZulu-Natal, after a
group travelling from Italy returned to South Africa, early in March 2020. By
11 March, there were a further six cases, all with recent travel histories. One
of these was in Cape Town, announced by the Western Cape
Provincial Government. Two more cases were announced in Cape Town, on
13 March. By 17 March, the number of South African cases had risen to 89,
which included the first local transmissions. On 23 March 2020, the number
had grown to 100 cases in the Western Cape, of which 85 were in Cape Town.
At this stage Cape Town had 25 percent of the reported cases in the country,
indicating an alarming, rapid spread of the disease. On 28 March, South Africa
recorded its first death. By 30 April, the total number of infections was 2020,
and four days later it had quickly reached 2 705.

[6] The government embarked on an aggressive response to curb the spread
of the disease. Under the Disaster Management Act 57 of 2002 (“the Disaster
Act”) the responsible Minister declared a ‘State of National Disaster’ on
15 March 2020. That evening, the President announced this in a televised
address to the nation. On 18 March, the Minister published regulations under
the Disaster Act prohibiting gatherings of more than 100 people, closing
schools and care facilities, and also limiting the sale and transportation of
liquor.3 On 23 March, the President announced a nationwide lockdown, to
commence on 23 March, and to continue until 16 April. New stringent
regulations (the Lockdown Regulations) were thus issued on 25 and 26 March
to give effect to the lockdown, requiring almost everyone to stay at home from
midnight 26 March until midnight 16 April.4

[7] There were exemptions to allow people to leave their homes for limited
purposes to perform essential services, obtain essential goods and services,
and for medical emergencies. Restaurants, such as Café Chameleon, were
forced to close and cease trading since 27 March 2020. The regulations were
relaxed later, permitting take-away food. Café Chameleon has thus sustained
devastating losses by the interruption of its business. It sought an indemnity
for these losses from Guardrisk, which rejected the claim. Café Chameleon,
therefore, approached the high court for relief.

3 ‘Regulations issued in terms of s 27(2) of the Disaster Management Act, 2002, GN 318, GG 43107, 18
March 2020.’
4 ‘Disaster Management Act, 2002: Amendment of regulations issued in terms of s 27(2), GN 398, GG 43148,
25 March 2020 and GN 419, GG 43168, 26 March 2020.’ Regulation 11B(1)(b) provided that ‘[d]uring the
lockdown, all businesses and other entities shall cease operations . . .’ It specifically included restaurants,
which were not included in previously.

[8] One of Guardrisk’s central averments in its answering papers, is that
the regulations upon which Café Chameleon relies for its cause of action –
reg 11B (1)(b) in particular, which applies to the closure of businesses – were
not promulgated because of a notifiable disease within 50 km of its premises.
Rather its purpose, as appeared from government announcements, was to
prevent the spread of Covid-19, and, to allow the health system to create
sufficient capacity to deal with the outbreak. Guardrisk submits that
Café Chameleon did not dispute this, which is fatal to its case.

[9] The fact is – and this is clear from the papers – when the
Lockdown Regulations were promulgated, Cape Town accounted for a large
proportion of Covid-19 infections. These infections were notifiable to the
government in terms of the Surveillance Regulations. The government was
therefore notified of the rapid spread of infections in Cape Town, and also in
other parts of the country. It responded by instituting the lockdown throughout
the country, including in Cape Town. Although Café Chameleon could have
been clearer about drawing the link between the local outbreak and the
imposition of the regulatory regime, it did so on any fair reading of the papers.
The subtle distinction Guardrisk seeks to draw, between Café Chameleon’s
pleaded case and Guardrisk’s denial as to what the purpose for the institution
of the lockdown was, is therefore one without substance. The true question in
this case is whether, properly interpreted, the infectious diseases clause covers
Café Chameleon for its loss. This is primarily a legal question, and, not one
of fact.

The Policy
[10] The policy provides cover for specified defined events. The ‘Defined
Events’, described in the ‘Business Interruption Section’, typically require
physical damage to property to be suffered for a successful claim. However,
there are two types of extensions to the physical damage requirement. One is
the damage extension to property that occurs in locations other than the
insured’s premises. The other non-damage extension includes loss for events
that do not cause damage to property, but occur within a specified radius of
the insured premises. The insured peril is, therefore, a defined event that
results in a business interruption.

[11] The non-property damage extension with which we are concerned,
including the infectious diseases clause (clause (e)), appears under the
heading, ‘Extensions and Clauses’. It must be read with the
‘Special Provisions’ clause, which defines a ‘notifiable disease’. The
non- property damage extension provides:
‘Infectious Diseases/Pollution/Shark and Animal Attack Extension
Loss as insured by this Section resulting [from] interruption or interference with the
Business due to:
(a)
murder or suicide occurring at the Premises
(b)
armed robbery, malicious and terrorist activities (whether actual or hoax) occurring
at the Insured
(c)
food or drink poisoning at the Premises or attributable to food or drink supplied
from the Premises
(d)
closure of the Premises due to defective sanitation, vermin or pests on the order of
a competent local authority
(e)
notifiable Disease occurring within a radius of 50 kilometres of the Premises
(f)
summons to appear in court as a witness by the Insured or any of the Insured’s
directors, partners of employees

(g)
chemical or oil pollution of beaches, rivers or waterways within a radius of 50
kilometres of the Premises
(h)
shark attack or attack by wild game including hippopotamus, rhinoceros, leopard,
cheetah, crocodile, buffalo and elephant within a radius of 50 kilometres of the Premises
Special Provisions
(a)
“Notifiable Disease” shall mean illness sustained by any person resulting from any
human infectious or human contagious disease, an outbreak of which a competent local
authority has stipulated shall be notified to them . . .’ (Emphasis added).

Interpreting Insurance Contracts
[12] This court recently restated the approach to interpreting insurance
contracts in Centriq Insurance v Oosthuizen:5
‘[I]nsurance contracts are contracts like any other and must be construed by having regard
to their language, context and purpose in what is a unitary exercise. A commercially
sensible meaning is to be adopted instead of one that is insensible or at odds with the
purpose of the contract. The analysis is objective and is aimed at establishing what the
parties must be taken to have intended, having regard to the words they used in the light of
the document as a whole and of the factual matrix within which they concluded the
contract.’

[13] In this analysis it must be borne in mind that insurance contracts are
‘contracts of indemnity’. They should therefore be interpreted ‘reasonably and
fairly to this end’.6 In this regard it is instructive to recall Schreiner JA’s
adoption of the following statement from the English authorities on insurance
law:7

5 Centriq Insurance Company Ltd v Oosthuizen and Another [2019] ZASCA 11; 2019 (3) SA 387 (SCA)
para 17.
6 Norwich Union Fire Insurance Society Ltd v South African Toilet Requisite Co Ltd 1924 (AD) 212 at 222.
7 May on Insurance (4 ed) at 174-175. Cited with approval in Kliptown Clothing Industries (Pty) Ltd v Marine
and Trade Insurance Co of SA Ltd. 1961 (1) SA 103 (A) at 107A-B. However, the recent statement in Ma-
Afrika Hotels and Another v Santam Limited  [2020] ZAWCHC 160 para 74, does not accord with our law.
It reads: ‘Insurance is intended to serve as a social safety net to cover financially devastating losses and

‘No rule, in the interpretation of a policy, is more firmly established, or more imperative
and controlling, than that, in all cases, it must be liberally construed in favour of the insured,
so as not to defeat without a plain necessity his claim to the indemnity, which in making
the insurance, it was his object to secure. When the words are, without violence, susceptible
of two interpretations, that which will sustain the claim and cover the loss, must in
preference be adopted.’

Guardrisk’s case a quo
[14] Before interpreting the infectious diseases clause, it is important to
understand Guardrisk’s opposition to the claim in the court a quo, as outlined
in its answering affidavit. It accepted that Covid-19 is a notifiable disease as
defined, and, also that it had occurred within 50 km of Café Chameleon’s
premises – both essential requirements of the insured peril. But it advanced
four interrelated arguments as to why the policy did not cover
Café Chameleon’s loss: First, no competent local authority had stipulated that
the disease should be notified in accordance with the policy. Second, as a
matter of construction, this requirement localises the scope, and the extent, of
the cover to the 50 km radius; the cover did not extend to the consequences of
events within a wider area, including countrywide or global events. Third, the
policy did not cover loss following closure of the premises as a result of a
government order. Finally, there was no causal link between the defined event
(the Covid-19 outbreak within the 50 km radius) and the interruption of the
business. This is because the interruption was a consequence of the
national lockdown, and, not the local occurrence of the disease.

compensate injured parties. This is precisely the safety net required as a result of the unprecedented Covid- 19
pandemic.’

[15] As to the contention that no competent local authority had stipulated
the disease, the court a quo undertook a comprehensive analysis of the
legislative framework governing notifiable diseases. This included an
examination of both the Health and Disaster Acts, including the
Surveillance Regulations and the Lockdown Regulations promulgated
thereunder. The learned judge found that even though the City of
Cape Town’s by-laws did not provide for the notification of human infectious
or contagious diseases, national legislation imposed an obligation to report
their occurrence to a local authority. He concluded that:
‘[T]he principal reason why the notification requirement was introduced to the Notifiable
Diseases Extension, was to ensure that cover thereunder would be triggered by outbreaks
of the most serious diseases, and not whether the source of that obligation to report the
gravity of the threat was national legislation, rather than subordinate legislation enacted by
a local authority.’8

[16] On this basis the learned judge rejected Guardrisk’s submission that the
claim fell outside the scope of the clause, because no competent
local authority had stipulated that the disease be notified to it. His criticism
that the submission amounted to a ‘narrow peering of words’, which did not
accord with the proper approach to the interpretation of insurance contracts
outlined earlier, was well founded. Guardrisk, wisely, abandoned the
argument in this court.

[17] The court a quo also dismissed Guardrisk’s three other arguments. I
shall consider these in due course. It is apposite to begin with the third point
raised in the high court i.e., that the policy does not cover loss following

8 Café Chameleon CC v Guardrisk Insurance Company Ltd (fn 2) para 62.

closure of the premises as a result of a government order. Although the high
court did not deal with the submission explicitly, it implicitly rejected it. This
is apparent from the learned judge’s conclusion. This issue lies at the heart of
the interpretation question: whether the infectious disease clause covers the
government’s response to Covid-19 in this case.

Does the insured peril include a government response to Covid-19?
[18] The trigger for coverage under the infectious diseases clause is that it is
notifiable. Diseases are notifiable when the law requires it to be reported to
government authorities.9 This is because they pose particular ‘public health
risks’.10 They have ‘a potential for regional or international spread’,11 and may
necessitate specific governmental action nationally, provincially and locally.12
The global response to Covid-19 exemplifies this.

[19] That a notifiable disease usually requires a government response would
have been appreciated by the contracting parties. They must therefore be taken
to have understood and agreed that ‘business interruption’ referred to in the
infectious diseases clause might result from a public health response to the
occurrence of an infectious disease.

[20] Counsel for Café Chameleon persuasively drew an analogy between
harm caused by a government response to a notifiable disease and fire
insurance, which covers incidental harm unavoidably caused by fire-fighters,
in response to a fire at a premises. In both cases the response to a notifiable

9 Regulation 13 of the Regulations relating to the Surveillance and Control of Notifiable Medical Conditions.
Fn 1 above.
10 Ibid Regulation 12(2)(a).
11 Ibid Regulation 12(2)(b).
12 Ibid Regulation 12(2)(c).

disease by public health authorities and of fire-fighters to a fire is integral to
the insured peril. That being so the only sensible interpretation of the clause
is that it includes and contemplates harm that is attributable to a government
response. It might be that the clause envisages only a lawful government
response and not any response, but that is not an issue we need consider.

[21] I, therefore, accept Café Chameleon’s core submission that a notifiable
disease almost always carries the risk of a government response, making it
part and parcel of the insured peril. As counsel for Café Chameleon put it:
‘because it is part of the insured peril, the government’s response is covered,
not because it is caused by what was insured against; it is covered because it
is what is insured against’.

[22] It follows that Guardrisk’s contention in the court below that the policy
did not indemnify business interruption due to closure following a
government order, had to fail. In this court, Guardrisk’s stance underwent
some mutation; it accepted, in response to questions from the court, that a
local government’s response to Covid-19 would be part of the insured peril.
But, it maintained, the national response did not fall within the ambit of the
clause. This is the gravamen of Guardrisk’s complaint.

Does the policy cover the Covid-19 pandemic?
[23] I must first deal with the submission Guardrisk made at the outset,
which is this. The infectious diseases clause, it argues, does not refer to, nor
contemplate, cover for the Covid-19 pandemic. This is because, as it explains
in its answering affidavit, the events brought about ‘went beyond the
imagination of everyone, and every industry, including the insurance

industry’. No one ever thought, Guardrisk asserts, ‘there would be a national,
and global, lockdown where commercial activity would for all practical
purposes cease to exist’. The consequence is that no insurance company
would have underwritten a policy where the risk of such large scale and
unimagined losses could materialise.

[24] In a nutshell Guardrisk’s contention is that because the parties had not
thought of the risk of a pandemic at the time they contracted (and the policy
does not explicitly refer to a pandemic), Café Chameleon is not covered. This
argument is premised on a fallacy that a court determines the intention of the
parties by having regard to what the parties subjectively believed or thought
when the policy was concluded. But as I have pointed out earlier, the
interpretation of a contract requires an objective analysis, regard being had to
language, context and purpose. The analysis is aimed at establishing what the
parties must be taken to have intended, not what their unexpressed thoughts
were, when they contracted. As a member of the court pointed out during the
hearing, the fact that a policy may include cover for earthquakes does not
mean that the parties realistically thought that the risk of an earthquake could
materialise. There is thus no substance in this argument.

Is the insured peril confined to a localised response to the infectious
disease?
[25] Although Guardrisk no longer persists with the argument that the policy
requires a local authority to stipulate the notification of the disease, it
contends, as a matter of construction, that this requirement supports its view
that the policy localises the scope, and the extent, of the cover to the 50 km
radius, and, excludes the consequences of events within a wider area,

including countrywide or global events. Simply put, it says that the cover is
expressly limited only to the particular consequences of a local occurrence of
the notifiable disease. A generalised government response to a national
occurrence of Covid-19, which is not aimed specifically at the local
occurrence, and causes business interruption and resultant loss, is not covered.
It is, therefore, impermissible, Guardrisk insists, to interpret the 50 km radius
requirement, as Café Chameleon does, as a mere qualifying criteria unmoored
from the causative link between the business interruption and the local
occurrence of the disease.

[26] Café Chameleon’s answer is that Guardrisk misconstrues the 50 km
requirement as being confined to local occurrences of infectious disease. It
submits that the infectious diseases clause has two threshold requirements for
indemnification: (a) a notifiable disease occurring, and, (b) within a radius of
50 km of the business premises. Once the threshold is established, the
remaining requirement is that the outbreak caused business interruption by
deterring potential customers from patronising the business. It does not
matter, the argument continues, that the interruption and consequent loss was
the result of a national government response to occurrences also extending
beyond the radius.

[27] In my view, Guardrisk’s interpretation of the insured peril as being
confined to local occurrences does not accord with a proper construction of
the clause. In response to a question from the court as to whether Guardrisk
accepted that Café Chameleon would have been covered if the local authority
– the City of Cape Town in this case – had imposed the lockdown, instead of
the government, Counsel for Guardrisk, quite properly, accepted that it would

have. Why then, it might be asked rhetorically, should the insured be denied
cover only because the government, rather than the local authority, took action
against an infectious disease that occurred, not only within the 50 km radius,
but also beyond it.

[28] Properly construed, I think, the 50 km radius acts both as a threshold or
qualifying requirement for liability under the clause, and, a break against
liability for far-flung occurrences beyond it. An example would be where
there is an outbreak of the disease on a tourist bus headed for Cape Town,
from Johannesburg, and, as a consequence the tourists are quarantined at a
hotel more than 50 km from Cape Town through government action. The
tourists have reservations at a Cape Town restaurant, but are compelled to
cancel the booking, which results in business interruption. It is evident that
there would be no cover because there is no notifiable disease occurring within
50 km of the business premises. If, however, the discovery of the outbreak
had occurred within this radius it would yield a different result.

[29] Guardrisk sought to argue by reference to several other examples that
Café Chameleon’s interpretation of the clause yields absurd results, because
it grants cover for business interruption caused by an outbreak within 50 km
of the premises, but denies cover where the notifiable disease is detected just
outside the radius. It criticises this interpretation as having the effect that cover
becomes a matter of ‘happenstance’, amounting to a ‘postcode lottery’.

[30] Café Chameleon answers this criticism convincingly: Drawing lines in
statutes or contracts, Mr Gauntlett argues on its behalf, often yields arbitrary
results. Guardrisk could have drawn the line much tighter at 5 km from the

premises, or chosen other distances arbitrarily – 30 km or 60 km. But it chose
50 km, apparently, without giving this much thought. Drawing lines in this
way, without an objective basis, will inevitably result in hard cases at the
margins, as in the tourist example given earlier, or when an insured who is
49 km from a reported occurrence of an infectious disease, qualifies for cover,
but not the insured who is 51 km away. This is not a problem of interpretation,
but arises unavoidably because Guardrisk itself drew these sharp lines.

[31] This much is clear from the facts. When the President announced the
lockdown on 23 March there were 100 reported cases of Covid-19 in the
Western Cape, of which 85, were in Cape Town. At this stage Cape Town had
25 percent of the reported cases in the country. This represented the highest
number in any area or region. It is, therefore, fair to say that the occurrence of
the disease was predominantly in Cape Town. There was thus a rapidly
spreading ‘notifiable disease occurring within a radius of 50 km of the
premises’, which required an urgent government response.

[32] Guardrisk submits that the lockdown was a response to several
outbreaks in different parts of the country, and, not only Cape Town. This is
so. But it is also undeniable that the rapid spread of the disease in Cape Town
would have weighed with the public authorities in recommending that a
national lockdown be implemented, including, and especially, in Cape Town.
Despite this, Guardrisk would have us accept that the clause covers only a
public health response to local occurrences, and, not to outbreaks in multiple
areas, which includes a local outbreak. A proper reading of the clause does
not support its stance.

[33] The purpose of the clause, quite clearly, is to provide cover for
business interruption due to occurrences of a notifiable disease within a 50 km
radius of the premises. The language of the clause contains no indication that
cover is provided only for a public health response that does not extend, nor
have its genesis, beyond the radial boundary. The parties must have
contemplated that the clause would provide cover for any public health
response to any outbreak of a notifiable disease, whether or not it occurs in
multiple localities, provided only that it also occurs within the 50 km radius.
Guardrisk’s interpretation is therefore neither commercially sensible, nor does
it reasonably or fairly accord with the purpose of the clause.

[34] Once it is understood that a notifiable disease as envisaged in the
infectious diseases clause entails a government response (national or local), it
must follow that the insured peril includes both its occurrence within the
radius, and, the government’s response to it. And where, as here, the response
is aimed at curbing the spread of the disease in multiple locations, including
the area that falls within the radius specified in the policy, it must also be
covered by the policy. The government response to Covid-19, which resulted
in the interruption of Café Chameleon’s business, and its consequent loss are,
therefore, covered by the policy. This conclusion renders the question of
causation, whether the insured peril ie, the presence of Covid-19 in
Cape Town and the government’s response, was the cause of the
business interruption, superfluous. I shall nevertheless, for the sake of fullness
deal with it, not least because Guardrisk’s case is framed primarily as one of
causation.

Causation
[35] The infectious diseases clause provides cover for loss resulting in
business interruption due to notifiable disease occurring within 50 km of the
business premises. Guardrisk, therefore, insists that there be a causal
connection between the defined event (the occurrence of Covid-19 within
50 km) and the business interruption. Guardrisk contends that there is no
causal link between the defined event, and, the interruption of the business.
This is because the interruption was a consequence of the lockdown, and, not
due to the local occurrence of the disease. Café Chameleon has, therefore, not
shown that the lockdown was the factual or legal cause for the interruption.

[36] The high court did not have the benefit of the argument made on
Café Chameleon’s behalf in this court dealing with the proper interpretation
of the clause. It thus also approached the problem primarily as one of
causation. The learned judge found that there was a ‘clear nexus’ between the
Covid-19 outbreak in Cape Town and
the imposition of the
national lockdown, and also that the harm to the business caused by the
outbreak was not too remote. He thus held that factual and legal causation had
been established.13

Causation in Insurance
[37] The general approach to causation also applies to insurance law.14
Factual causation is the first enquiry. The diagnostic tool is the ‘but for’ test,
which involves a ‘hypothetical enquiry as to what probably would have
happened but for the wrongful conduct of the defendant’.15 The test is usually

13 Café Chameleon v Guardrisk Insurance Co Ltd (fn 2) paras 74 and 81.
14 Napier v Collett and Another 1995 (3) SA 140 (A) at 144C-G.
15 Lee v Minister of Correctional Services [2012] ZACC 30; 2013 (2) SA 144 (CC) para 40.

applied in the law of delict. In the insurance context, the analysis is aimed at
establishing what would have happened, but for the insured peril.

[38] The courts have recognised that a rigid application of the test may
sometimes yield unpalatable and unfair results, and, have thus cautioned
against applying ‘rigid deductive logic’.16 In what is now an oft-quoted
passage from this court, in Minister of Safety and Security v Van
Duivenboden17 Nugent JA said:
‘ . . . A plaintiff is not required to establish the causal link with certainty, but only to
establish that the wrongful conduct was a probable cause of the loss, which calls for a
sensible retrospective analysis of what would probably have occurred, based upon the
evidence and what can be expected to occur in the course of ordinary human affairs rather
than an exercise in metaphysics.’

[39] The common law test is thus applied flexibly, recognising that
‘common sense may have to prevail over strict logic’.18 In the contractual
context it has long been accepted that causation rules should be applied ‘with
good sense to give effect to, and not to defeat the intention of the contracting
parties’.19 For insurance contracts the question always is: ‘[H]as the event, on
which I put my premium, actually occurred?’20

[40] Of relevance in the instant case is that there may be more than one cause
or multiple causes giving rise to a claim. In that case ‘the proximate or actual
or effective cause (it matters not what term is used) must be ascertained . . .’21

16 Lee v Minister of Correctional Services [2012] ZACC 30; 2013 (2) SA 144 (CC) paras 44 and 47.
17 Minister of Safety and Security v Van Duivenboden NO 2002(6) SA 431 (SCA) para 25.
18 Lee (fn 15) para 44.
19 Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350 at 365.
20 Becker Gray & Co v London Assurance Corp [1918] AC 101 at 118.
21 Incorporated General Insurances Ltd v Shooter t/a Shooter’s Fisheries 1987 (1) SA 842 (A) at 862C-D.

Even if a loss is ‘not felt as the immediate result of the peril insured against,
but occurs after a succession of other causes, the peril remains the proximate
cause of the loss, as long as there is no break in the chain of causation’.22 A
proximate cause should be identified as a matter of ‘reality, predominance
[and] efficiency’.23 Put differently the real or dominant cause is ascertained
by applying good business sense.24

[41] The enquiry into legal causation usually follows factual causation. It
asks whether there is a sufficiently close relationship between the factual
cause and the consequent loss to give rise to legal liability.25 Put differently,
the question is whether the loss is too remote for the factual cause to also be
the legal cause. If not, no legal liability may arise.

[42] In delict, policy considerations are applied to guard against attaching
‘liability in an indeterminate amount for an indeterminate time to an
indeterminate class’.26 In contract, though, these policy considerations
‘usually do not enter into the enquiry’.27 Instead, and in particular with
insurance contracts, as Grosskopf JA observed in Napier v Collett:
‘[O]ne would have prime regard to the provisions of the insurance policy. Thus for example
the policy may extend or limit the consequences covered by the policy, for example by
laying down exceptions. But in addition to any specific provisions, matters such as the type

22 Mutual & Federal Insurance Company Ltd v SMD Telecommunications CC [2010] ZASCA 133; 2011 (1)
SA 94 (SCA) at para 11.
23 Leyland Shipping (fn 19).
24 Global Process Systems Inc & Anor v Syarikat Takaful Malaysia Berhad (The Cendor Mopu) [2011]
UKSC 5.
25 Napier (fn 14) at 144D-F.
26 Country Cloud Trading CC v MEC, Department of Infrastructure Development, Gauteng [2014] ZACC
28; 2015 (1) SA 1 (CC) para 24 (citing Ultramares Corporation v Touche 174 NE 441(1931) at 444).
27 Napier (fn 14) at 143J (citing Concord Insurance Co Ltd v Oelofsen NO 1992 (4) SA 669 (A)).

of policy, the nature of the risk insured against and the conditions of the policy may assist
a court in deciding whether the factual cause should be regarded as the cause in law.’28

[43] Sometimes, complex legal questions may arise, ‘where several factors
concurrently or successively contribute to a single result and it is necessary to
decide whether any particular one of them is to be regarded legally as a
cause’.29 Effect must then ‘be given to the parties’ own perception of causality
lest a result be imposed upon them which they did not intend’.30

Was factual and legal causation established?
[44] As mentioned, Guardrisk contends that there was no causal link
between the defined event (the Covid-19 outbreak within the 50 km radius)
and the interruption of the business. Café Chameleon has therefore not proved
factual causation. Its argument is this. The application of the ‘but for’ test in
an insurance case requires the correct identification of the counterfactual, with
reference to the defined event. It involves a mental elimination of the defined
event. The counterfactual posited is: but for the elimination of the occurrence
what would have happened. Self-evidently, the answer to this question is,
there would still have been business interruption because of the
national lockdown. Ergo, the defined event was not the factual cause of the
business interruption.

[45] There is a seductive allure to the simplicity of the question posed by
Guardrisk, and, the answer it inevitably yields. But, I have already found, as
a matter of construction, that the defined event or insured peril is the

28 Napier (fn 14) at 144E-F.
29 Concord Insurance (fn 27) at 673I.
30 Ibid at 674A-B.

occurrence of Covid-19 and the government’s response. So the proper
question in applying the ‘but for’ test in this case is to ask whether, but for the
defined event (properly understood as the occurrence of Covid-19 and the
government response) would the business have been interrupted.

[46] Guardrisk pushes back against this approach. It insists that even if the
defined event includes a government response, it must be factually linked to
the localised outbreak of the disease. On this basis it accepts that a lockdown
imposed by a local authority in reaction to the outbreak would have been a
factual cause of the business interruption. The national lockdown, which
caused the business interruption was, however, aimed at curbing the spread of
the disease throughout the country, rather than Cape Town, specifically.
Therefore, contends Guardrisk, the outbreak of the disease in Cape Town did
not cause the business interruption.

[47] The difficulty Guardrisk cannot overcome is that its central premise is
founded on an artificial separation between the occurrence of the
local outbreak in Cape Town and government’s response to the
national outbreak, which perforce included Cape Town, as I have pointed out
earlier. As the high court put it, correctly I think, there was a ‘clear nexus’
between the local occurrence of Covid-19 and the lockdown.

[48] Viewed slightly differently, because the lockdown was a response to a
national outbreak, which included, predominantly, the Cape Town outbreak,
Café Chameleon’s losses were due at the very least to concurrent causes. As
a matter of ‘reality, predominance and efficiency’, therefore, the
local outbreak and government response, was the real or proximate cause of

the business interruption. This conclusion not only accords with reality but
also makes good business and common sense. So, when Café Chameleon
asked the question: ‘[H]as the event, on which I put my premium, actually
occurred’, there could have been only one answer.

[49] Having established that the local occurrence of Covid-19 and the
government’s lockdown was the factual cause of Café Chameleon’s loss, the
focus shifts to whether it was also the legal cause. In the court a quo, Guardrisk
invoked the spectre of indeterminate liability and potential collapse of the
insurance industry, should the insured’s interpretation of the clause be upheld.
The court dismissed the argument on the ground that these gloomy predictions
were speculative and that Guardrisk had provided no evidence regarding its
own exposure. But even if this were so, it reasoned:
‘[I]t cannot be a defence for an insurer to say that it must be excused from honouring its
contractual obligations because its business has unexpectedly incurred greater debt than
had been expected.’31

[50] In this court Guardrisk abandoned this argument because, as is clear
from Napier v Collett,32 policy considerations, such as indeterminate liability
do not play a role in a contractual setting. Instead the focus is on the provisions
of the insurance policy. Accepting this approach, Guardrisk thus contended
that Café Chameleon had not proved that the local occurrence of Covid-19
was ‘sufficiently intimately connected with the imposition of the regulations’
to impose liability on it.

31 Café Chameleon v Guardrisk Insurance Company Ltd (fn 2) para 79.
32 Napier (fn 14) at 143J.

[51] Once we accept, as I have, that the government response through the
imposition of the lockdown, was both a proximate cause, or as the high court
found, sufficiently closely connected to the business interruption and
consequent loss, the conclusion that legal causation was proved, follows
inevitably.

The Financial Conduct Authorities Case
[52] The parties drew our attention to a recent test case in the UK High Court
involving several sample business interruption policy wordings from eight
insurers.33 The case was brought by the Financial Conduct Authority
(the FCA) representing the interests of insured businesses. As with the present
case, the FCA sought declarations in respect of these wordings in respect of a
set of agreed facts.

[53] In this regard it is apparent that the United Kingdom’s regulatory
response to Covid-19 was similar to South Africa’s. In the middle of March,
the UK government directed people to stay at home and stop non-essential
human contact and travel. On 20 March, it ordered restaurants to close, and, a
few days later, it announced a national lockdown, including all non-essential
businesses in its dragnet.

[54] Argenta’s was one of the policies the court was asked to interpret. It
had a remarkably similar infectious diseases clause to the one at issue in this
appeal. It extended business interruption cover ‘for such interruption as a
result of . . . any occurrence of a [notifiable human disease] within a radius of
25 miles of the [premises]. It also took care to limit its liability to £25 000,

33 Financial Conduct Authority v Arch Insurance (UK) Ltd and Others [2020] EWHC 2448 (Comm).

which Guardrisk, doubtless must rue, has not done’.34 Argenta, nevertheless,
sought to escape any liability by contending, as Guardrisk does here, that an
insured must show that a business interruption was the ‘proximate cause’ by
the occurrence of Covid-19 within the 25 mile radius. Unless it is able to do
so, the argument continued, there is no cover for losses due to measures taken
in response to occurrences outside the radius or of the public response to such
measures.35

[55] The court found, as a matter of construction, that Argenta’s argument
did not accord with the language of the policy. It reasoned that the text ‘is not
expressly confined to cases where the interruption has resulted only from the
instance(s) of a Notifiable Disease within the 25 mile radius as opposed to
other instances elsewhere’.36 Instead, it continued, ‘the clause can and should
properly be read as meaning that there is cover for business interruption
consequences of a Notifiable Disease which has occurred, i.e. of which there
has been at least one instance within a specified radius’.37

[56] Significantly, the court accepted, as I have, that the nature of a
notifiable disease involves a government response. It explained that it is in
‘the nature of human infectious and contagious diseases that they may spread
in highly complicated, often difficult to predict, and what may be described
as “fluid” patterns’. The list of notifiable diseases ‘includes some which might
attract a response from authorities which are not merely local authorities, and

34 Financial Conduct Authority v Arch Insurance (UK) Ltd and Others [2020] EWHC 2448 (Comm) para
150.
35 Ibid para 156.
36 Ibid para 102. Although this quote refers to another clause where the same argument was made on behalf
of the insurer ie, in the RSA case, it is clear that the same reasoning was applied for this clause.
37 Ibid.

which is not a purely local response’.38 I pause to mention that this observation
echoes the requirement in South Africa, that a Category 1 notifiable medical
condition, which includes respiratory disease caused by a novel respiratory
pathogen
referred
to
in
Table
of
Annexure
A
of
the
Surveillance Regulations, which Covid-19 is, must be reported to the
Department of Health within 24 hours. The court thus concluded that the
parties to this kind of insurance ‘must have contemplated that there might be
relevant actions of public authorities which affect a wide area’ and that ‘the
authorities might take action in relation to the outbreak of a notifiable disease
as a whole, and not to particular parts of an outbreak’.39

[57] The court also based its conclusion on its interpretation of the clauses,
even though much of the insurers’ arguments were put in terms of causation.
Put simply, it said that the case was about construction rather than causation.40
However, it accepted the FCA’s argument that given the nature of the cover
that was provided ‘proximate causation’ would be satisfied:
‘[In] a case in which there is a national response to the widespread outbreak of a disease.
In such a case we consider that the right way to analyse the matter is that a proximate cause
of the business interruption is the Notifiable Disease of which the individual outbreaks
form indivisible parts.’41

[58] I refer to this case with caution bearing in mind that it was decided on
a set of agreed facts and that there were differences – in some instances
important differences – in the language of the policies there in issue. We were

38 Financial Conduct Authority v Arch Insurance (UK) Ltd and Others [2020] EWHC 2448 (Comm) para
102.
39 Ibid.
40 Ibid para 164.
41 Ibid para 111.

also informed from the bar that the UK Supreme Court is yet to deliver
judgment in an appeal by both the FCA and the insurers in respect of some of
these findings. This notwithstanding, I consider the court’s reasoning
persuasive, at least in relation to the policies that bear a similar wording to the
present one.

[59] Guardrisk has three remaining arguments that require brief
consideration. I deal with the Trends Clause first.

The Trends Clause
[60] As an afterthought, Guardrisk contends that the ‘trends’ clause or ‘other
circumstances clause’ effectively denies Café Chameleon cover. The purpose
of the clause in insurance contracts is to adjust the loss an insured has suffered
as a consequence of the insured peril, so that the insured is put in the same
trading position after the business interruption, as if it had not happened. The
formula, according to which the loss is calculated, is adjusted to reflect the
projected fate of the business, as if the business interruption had not occurred.
Café Chameleon is not entitled to cover, it argues, because the Lockdown
Regulations constituted an ‘other circumstance’ affecting the business, the
effect of which is that it would have suffered a loss even if there was no local
occurrence of Covid-19.

[61] Guardrisk did not advance this argument in its answering papers, nor in
the court a quo. On appeal Counsel merely stood by his written submissions,
apparently without conviction. The short answer to this contention is that the
trends clause is relevant to the quantification of loss, not liability, which is
what we are here concerned with.

[62] More fundamentally Guardrisk errs in construing the lockdown
regulations as an ‘other circumstance’. The trends clause applies when an
adjustment must be made, in its words, ‘to provide for the trend of the business
and for variations or other circumstances affecting the business either before
or after the Damage or which would have affected the business had the
Damage not occurred’. An ‘other circumstance’ by definition, therefore,
refers to an occurrence separate from or independent of the insured peril, not
one that is intrinsic to it. The Lockdown Regulations, I have found, were part
and parcel of the insured peril. They are not an ‘other circumstance’ as
envisaged in the trends clause. If Guardrisk’s submission were correct it
would have the extraordinary consequence that despite being part of the
insured peril for which cover is provided, the Lockdown Regulations
simultaneously operate as a circumstance to negate the cover.

The Remaining submissions
[63] Guardrisk persisted with two other submissions in its heads of
argument, but not argued orally. The first is that the court a quo erred because
the declaratory relief sought, and the order granted, did not mirror the
language of the infectious diseases clause. The declaration sought was:
‘That it is declared that the respondent is obliged to indemnify the applicant in terms of the
Business Interruption section of policy number HIC 0000-2950 for any loss suffered by
the applicant, calculated and quantified as provided in that section, arising since 27 March
2020 from the interruption of the business as a result of the promulgation and enforcement
of Regulations made by the Minister of Cooperative Government and Traditional Affairs
under the Disaster Management Act 57 of 2002 in response to the Covid-19 pandemic in
South Africa.’
And what was granted, but apparently not sought was:

‘That the Respondent is liable to indemnify the Applicant in terms of the Business
Interruption Section of Policy number HIC 0000-02950 for any loss suffered since
27 March as a result of the Covid-19 outbreak in South Africa which resulted in the
promulgation and Enforcement of Regulations made by the Minister of Co-operative
Government and Traditional Affairs under the Disaster Management Act, 57 of 2002.’

[64] The infectious disease clause covers ‘loss as insured by this Section
resulting in interruption or interference due to . . . notifiable Disease occurring
within a radius of 50 kilometres of the Premises’. It is, therefore, contended
that it was not competent for the court to grant relief that was not asked for or
fell within the ambit of the clause.

[65] It is apparent that, whatever the formulation of relief of the order sought
or granted, the essential dispute between the parties was over whether the
business interruption was due to the lockdown. That is essentially the relief
that was sought and granted despite the minor differences in language. The
argument is devoid of merit.

[66] Finally, Guardrisk had one more technical argument, also meritless for
its abject formalism. It contended that Café Chameleon relied on the wrong
policy, which was the renewed policy that took effect on 1 April 2020 rather
than the identical earlier policy. The lockdown commenced on 26 March, and,
Café Chameleon claimed loss from 27 March. There is no dispute that both
policies applied during the period for which the loss is claimed. In its replying
affidavit, Café Chameleon asked the court to grant relief on whichever version
of the policy it regarded appropriate. The Court a quo correctly did so.

Conclusion
[67] The central question in this appeal was whether the government’s
imposition of a lockdown in response to multiple outbreaks of a ‘notifiable
disease’ i.e. Covid-19, throughout the country, and predominantly in
Cape Town, where Café Chameleon’s operates its business, was covered by
the infectious diseases clause. The question was answered in favour of
Café Chameleon, as was the question whether the outbreak of Covid-19 in
Cape Town was the cause of its business interruption. In coming to this
conclusion I am fortified by much of the reasoning in the FCA case42 and two
recent judgments of the Western Cape High Court: Ma-Afrika Hotels and
Another v Santam Limited43 and Interfax (Pty) Ltd and Another v Old
Mutual.44

[68] In the result the following is made:
‘Paragraphs 2 and 3 of the order of the court a quo are set aside. Save
as aforesaid, the appeal is dismissed with costs, including the costs of
three counsel.’

__________________
A CACHALIA
JUDGE OF APPEAL

42 Financial Conduct Authority (fn 33).
43 Ma-Afrika (fn 7).
44 Interfax (Pty) Ltd and Another v Old Mutual Insure Limited [2020] ZAWCHC 166.

Appearances

For appellant:
I P Green SC (with him R Ismail and J Chanza)
Instructed by:
Clyde & Co Inc, Sandton

Honey Attorneys, Bloemfontein

For respondent:
J J Gauntlett SC QC (with him S P Rosenberg SC,
T Tyler, P Long and J Mitchell)
Instructed by:
Dunster Attorneys, Cape Town

Phatshoane Henney Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN
THE SUPREME COURT OF APPEAL

GUARDRISK INSURANCE COMPANY LTD v CAFÉ CHAMELEON CC
(Case no 632/2020) [2020] ZASCA 173 (17 December 2020)

From:
The Registrar, Supreme Court of Appeal
Date:
17 December 2020
Status:
Immediate

The following summary is for the benefit of the media in the reporting of this
case and does not form part of the judgment of the Supreme Court of Appeal

The Supreme Court of Appeal (SCA) today, in a unanimous judgment, dismissed
an appeal by Guardrisk Insurance Company against a judgment of the Western
Cape High Court upholding an insurance claim by Café Chameleon arising from
the Covid-19 pandemic. It ordered Guardrisk to pay the costs of the appeal,
including the costs of three counsel.
Café Chameleon operates a restaurant business in Cape Town. On 27 March it
was forced to close its business following the lockdown announced by the
President. It suffered huge losses, as did many other businesses. It claimed these
from Guardrisk, with whom it had an insurance policy. The policy covered Café
Chameleon for ‘loss . . . resulting in interruption of the business due to notifiable

disease occurring within 50 km of the premises’. It defined a notifiable disease as
any ‘illness sustained by any person from any human infectious or human
contagious disease, an outbreak of which the competent local authority has
stipulated shall be notified to them’.
When the lockdown was announced, Cape Town accounted for 25 percent of the
reported cases nationwide and was thus predominant cause for the government’s
imposition of the lockdown.
Guardrisk argued that the Café Chameleon’s losses were not due to the
occurrence of Covid-19 within 50 km of the business but because of the
lockdown. And further that the purpose of the lockdown was to curb the spread
of the disease throughout the country; it was not aimed specifically at dealing
with the outbreak in Cape Town.
The SCA, however dismissed the argument. It accepted Café Chameleon’s
submission that its business interruption was caused by both the occurrence of
the Covid-19 within the 50 km radius and the government lockdown. And also
said that a fair reading of the policy provided cover for both the outbreak of the
disease and the government’s national response, which included a lockdown in
Cape Town.