The water crisis and your insurance policy

By Janice Roberts

The City of Cape Town declared water restrictions in January 2016 which have led to institutions, residents, farmers and businesses all being adversely impacted. To make matters worse, water resources have been put under tremendous strain due to the holiday season.  But what impact does all this have on your insurance policy?

In a note to clients today, RBS Insurance Brokers explained that asn the drought conditions continue to deteriorate, the shortage of water could materially affect the function or effectiveness of water-dependent firefighting equipment and sprinkler systems.

“The water crisis therefore requires additional precautions to be taken by yourselves to minimise the risk of loss or damage to property – a general policy condition in most insurance contracts. During these prevailing conditions, failure to take reasonable measures to safeguard property and lives could prejudice you in recovering from a loss event and may also be in contravention of the regulations on safety in the workplace.”

RBS added that precautions taken should always be in line with the principles of water conservation outlined by the City of Cape Town.

It stated that with respect to sprinkler-protected property, the following conditions apply:

“Fire cover will respond during a period of intentional water cut-off, reduced water pressure or any form of water rationing by the Authorities (other than suspension of the water supply due to, for example, non-payment of accounts, etc.) as a result of the prevailing drought conditions, that directly gives rise to sprinkler systems not performing their function or being ineffective during an event.

‘You are still responsible for the maintenance of the sprinkler system and for ensuring that the system is in good working order. Should the system be defective, at the time of the loss, your claim may be rejected.
You must keep records and proof of the last service and/or test of the system (on premises and elsewhere). In this regard, we encourage the closed-circuit test which does not require more or additional public water supply than already in the system.

“Should at the time of loss, the last date of service or the last test be out of cycle or out-dated, your claim may be rejected.”

Loss of Income due to the business being interrupted

RBS added that unfortunately, insurance policies do not respond to losses resulting from damage directly or indirectly caused by drought or shortage of water.

It stressed that the abovementioned is intended as a guide only to assist clients’ thinking and decision making.

“Please contact your broker if you have any further queries,” RBS concluded.

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