How water restrictions may impact commercial insurance

by BERTUS VISSER

Although the City of Cape Town has pushed back the anticipated date of the dreaded Day Zero, the risk of the city’s taps running dry remains very real.

If you are a working Cape Town resident you might be wondering how the company you work for – or worse, your own business – will be affected by water restrictions, and whether your insurance will cover you.

Business interruption is a reality facing many in the commercial sphere – and if you rely on water to keep your business running, Day Zero could result in serious disruptions. A recent survey conducted by the Cape Town Chamber of Commerce revealed that 7% of businesses in Cape Town are sure they will have to close their doors come Day Zero.

Business interruptions could occur in many ways. For example:

  • Your employees may have to collect water, so they won’t be able to be at the office all day.
  • You are in the business of using water to trade, such as hairdressing or car washing.
  • You have frozen goods that may be spoiled without ice, or other stock that may perish without water supply.

Unfortunately, standard commercial policies do not cover loss of income due to drought. Generally, these policies do provide for losses arising from interruptions to or interferences with a business that are caused by total or partial failure of public water, gas or electricity supplies. However, drought is usually listed as an exclusion.

A typical policy schedule might state that it does not cover loss resulting from damage directly or indirectly caused by:

Drought.

Pollution of water.

Shortage of fuel or water.

A fault on any part of the installation belonging to the premises.

The exercise of an authority empowered by law to supply water, gas.

It is a scary reality that drought is considered uninsurable. So, the best you can do is to keep water usage down to a minimum and avoid as many risks as possible. We’ve included a few tips.

Put out fires before they start – Being savvy when it comes to fire risk in these dry conditions, can really go a long way. The National Building Regulations on fire protection codes require you to keep maintained fire extinguishers, fire pumps or water tanks on business premises. It is also advisable to address any electrical issues or faults. Finally, fire breaks and clearing of vegetation can also help prevent fire spread, especially for agricultural industries.

If you have sprinklers on site, it is very important to make sure they are no longer in use – they can spark if they are turned on and no water reaches them, which could result in a fire. Rather keep them off and make sure there are several regularly serviced fire extinguishers on site. But be sure to consult with your adviser or insurer before you disconnect them.

SASRIA cover against riots will also be important. Sadly, when a resource like water becomes scarce and precious, fights tend to break out – so it is best to be prepared.

Be proactive – advise your employees, or be a good employee. If the water supply is interrupted or turned off completely, open taps can cause flooding once the water supply is restored. This may seem like a problem that won’t occur easily, but the bigger the company and the more bathrooms and employees, the more chance of a tap accidently being left open – imagine the impact if it is over an entire weekend, while no one is there.

Also make use of water-wise products such as waterless hand sanitisers, or insist on controlled flushing. These measures can help save an average of two to three litres on hand washing alone per person, not to mention the many litres for each toilet flush.

Bertus Visser is chief executive of distribution at PSG Insure.