Tag Archives: Knowles Husain Lindsay Inc


The unprecedented halt to business activity brought on by the coronavirus lockdown has many businesses wondering if their insurance will cover any of their losses. It is complicated, explains Nicholas Taitz, director at legal firm Knowles Husain Lindsay Inc.

“Inevitably, the consequence of lockdown is that businesses across the board are suffering,” says Taitz. “At the very least, they face loss of revenue, laying-off of staff and supply chain failures. At worst, they are forced to shut down for good.”

Are such losses of revenue or business closure covered by insurance? Taitz cautions that there is no simple answer. 

“The harsh reality is that – in most commercial policies issued in South Africa – there will no protection against loss of revenue,” he says. “While there are certain extensions of cover available in the South African market, there are also exclusions from cover in some policies.”

In terms of insurance policy benefits, the consequences of the coronavirus shutdown should not be confused with a force majeure situation – where a contract cannot be performed, or a sports event cannot take place for reasons beyond anyone’s control. The first step for any business is to get professional advice on whether it is entitled to any insurance benefits against the consequences of the state of disaster. 

“Where a company has cover for business interruption, this may well include the impact of an infectious disease or pandemic like the coronavirus,” he says. “However, this would have to be evaluated in the light of the particular insurance contract in question.”

Taitz urges businesses to take legal advice on the details of their insurance agreements, and also to consider appropriate extensions of cover or additional cover in the light of the current crisis and its consequences.

“It’s important to remember though that no insurer will provide cover for coronavirus-related losses now,” he says. “It is a fundamental principle of insurance that it is undertaken to cover potential occurrences or fortuities, and not ones which have already taken place.”

He raises a further insurance issue related to the widespread necessity for work-from-home arrangements, especially where people are taking company-insured computers and office equipment home.

“Insurance contracts covering such equipment will ordinarily have been issued on the understanding that it is physically located in a secure office space,” he says. “Where employees have taken equipment home, the insurer needs to be notified in the manner prescribed by the relevant insurance contract.”

Neither should it be assumed that it is enough simply to notify the insurer; the contract may not entitle the insured business to unilaterally alter the terms of the policy in this way. The level of security at a private home, for instance, may be much lower than the office – requiring the insurer’s risk and insured’s premium to be adjusted.


Employers must understand that the Covid-19 and the national lockdown has not suspended employment rights, warns Grant Nirenstein, director at law firm Knowles Hussain Lindsay Inc.

“The disregarding of employees’ rights will prove to be a costly mistake, especially now the Commission for Conciliation, Mediation and Arbitration (CCMA) has opened and labour courts are set to resume operations,” says Nirenstein. “These agencies will inevitably be inundated with referrals by employees, and transgressions will not be sympathetically viewed.”

He notes that recent weeks have seen much confusion among both employers and employees, fuelled by misinformation about employment obligations. A key principle for employers to remember is that employment is a binding contract, and they are not permitted to unilaterally change material employment conditions – especially where this will prejudice an employee.

“Unsurprisingly, one of the material terms of an employment contract is remuneration,” he says. “To amend the terms of remuneration therefore needs the agreement of the employee.”

To understand how the principle of ‘no work, no pay’ may be applied, a distinction must be drawn between two common scenarios. One is where the employer is taking steps to salvage the viability of their businesses in the face of reduced income and the other is where employees are lawfully prohibited from working during the lockdown period.

“The restaurant industry, for example, has been lawfully precluded from operating during the lockdown period to date, so restaurant employees have been precluded from working,” he says. “This is a direct consequence of the lockdown regulations and not the product of operational considerations on the part of any employer.”

This situation – referred to as the supervening impossibility of performance – allows ‘no work, no pay’ to be unilaterally implemented by the employer. This means an effective suspension of the employment relationship, often referred to as ‘temporary layoff’.

“A difficulty employers face is how to deal with employees who refuse to agree to a reduction of earnings or short time,” says Nirenstein.

There are effectively four options for employers, he says. The first is not to change the terms of employment, which under the circumstances may not be feasible. The second option is to implement a ‘no work, no pay’ policy, which is more prejudicial than reduced earnings or moving to short-time.

“Employees who refuse to agree to a payment reduction or imposition of short-time should judiciously consider their options, as an unreasonable refusal may, in itself, constitute a career-limiting decision,” he says. This is because cost-saving measures such as these are generally not contemplated by employers who need not implement such measures. Failing to agree to an employer’s request in these circumstances may lead to retrenchment proceedings in terms of section 189 of the Labour Relations Act – which is the third option for employers.

“Commencing retrenchment proceedings is exceptionally prejudicial, particularly in the context of a Covid-19 ravaged economy,” he says. “It is important to note that intrinsic in legitimate Section 189 proceedings, options short of dismissal must be considered and explored. In this context, payment reduction and short-time can be implemented as an alternative to dismissal, failing which retrenchment would be the fallback position.”

The fourth option is to consider liquidation or business rescue proceedings.