Load shedding has come to a halt – for now. But before you breathe a sigh of relief, remember that Eskom is facing a crisis, and that belts may need to tightened until 2013, when new base-load stations start coming online. That means that power interruptions have not gone away for good.
Louw Conradie, head of Business OUTsurance, says policyholders should contact their insurance brokers if they are unclear about their exact cover when it comes to the impact of power outages on their business.
When is business loss as a result of power cuts covered by insurance? Financial losses suffered as a result of the interruption of your business are covered by what is known as business interruption insurance. This type of policy covers your business for the financial loss suffered following the interruption of your business.
To have a valid claim, the interruption to your business should have been caused by one of a specific list of insured perils such as fire, explosion, acts of nature, bursting of geyser and water pipes, malicious damage or impact.
Power surges and dips are not covered under business interruption cover. An interruption of your business caused by the interruption of the public supply of electricity, telephone service, water, sewerage or gas will be covered by Business OUTsurance, but the interruption must be caused by one of the perils noted above and must persist for an uninterrupted period of more than 24 hours.
This means that businesses are only covered for electricity blackouts if the interruption is caused by damage as a result of a fire, lightening or impact. In general, business policies do not cover situations where power is deliberately withheld by the provider or where the interruption is a result of utilities being unable to supply sufficient power, as in the case of load-shedding.
Items such as burglar alarm batteries must be serviced so that they can cope with interruptions of up to eight hours. When assessing a claim, the insurer decides whether the incident was beyond the policy holder’s control and whether they were already regular alarm users who activated their alarms after hours. This is ascertained by checking with the alarm company for frequency of use.
What are the best ways to protect businesses from losses caused by power outages? Business owners should understand the potential damage that power outages may cause to their equipment. The installation of surge protectors to essential or sensitive electrical and electronic equipment should be considered, even though it may not be a requirement set by your insurer.
- Although many companies have an uninterrupted power supply (UPS), this does not always shield the equipment from surge damage as it only offers partial protection. Businesses are urged to install surge arrestors and additional protection. These could cost anything from R200 to R2 000 depending on a specific product and the installation fee.
- Damage to equipment caused by power surges and dips is usually covered under the buildings, contents and electronic equipment sections of your insurance policy.
- The buildings section covers items such as fixed plant and machinery, alarm systems, gate motors, intercoms, boreholes and swimming pool pumps.
- The contents section covers items such as moveable plant and machinery, electrical items, kitchen equipment and refrigeration equipment.
- The electronic equipment section covers computers, servers, fax machines, copiers, audio and visual equipment, medical, technical and other industrial equipment.
- Stock must be insured separately. Deterioration of refrigerated stock is only covered where the cooling unit was out of order for a period of 24 hours or longer due to an electrical or mechanical breakdown of the unit or of the equipment supplying the electricity.
Are there any other questions to consider such as damage to equipment by power surges? In many cases, underwriting rules require that certain sensitive electrical and electronic equipment be protected against lightning and electrical surge damage. The details will either be included in your schedule or in a special conditions letter accompanying your policy.
