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LIABILITY CLAIMS RISK FOLLOWING ESKOM OUTAGES March 13, 2014 Laura Owings Short term No comments



Eskom load shedding liability

With Eskom predicting power outages until April, the risk that businesses could face legal liability is rising. While the physical risks associated with Eskom’s load shedding are well known to business, the various legal issues arising from power cuts require greater scrutiny.

“Businesses have a duty of care owed to their customers to ensure that they have back-ups or safety measures in place, and should therefore ensure that they have adequate liability policies in place should these claims occur,” warns Simon Colman, litigations risk executive at RBS.

According to Colman, directors and officers coverage and public liability insurance policies are the most likely to be impacted, with claims possible in a range of different environments.

“Shopping malls, underground parking garages, factories – all of these present potentially dangerous environments when the lights go out. Laying blame at the utility’s door, I do not believe absolves the insured from their responsibilities,” says Colman.

With Eskom warning that the risk of load shedding would continue until April, when summer rains in the eastern part of the country ease, brokers have a responsibility to ensure their clients are prepared to mitigate risks.

“Often, our clients forget that they have a duty of care to their employees and customers to ensure safety and business continuity during scheduled power failures,” says Colman.

“Business owners and senior managers should also be aware that their fiduciary duties include risk management.  If a power shortage is a known risk, they need to act to mitigate that risk. Failure to do so may open them up to personal liability,” Colman concludes.

Last week, Eskom instituted emergency load shedding on a national scale, for the first time since 2008. The power utility is providing system status bulletins on its website every Monday and Thursday, outlining the likelihood of power outages.

While the power emergency has been lifted, Eskom maintains that the system is “extremely tight, with demand closely matched to supply,” meaning that there is no reserve margin at evening peak usage times.

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