According to a recent article release on Sunday 4th
April 2021 in Sunday World, the headlines read “SA Could be plunged into
total darkness”. Click
here to see full article.
This relates to Eskom losing a court battle to stop a
foreign-based multinational software corporation , Oracle Corporation, from
withdrawing its crucial services over a dispute relating to billions of Rands
owed by the power utility.
Without a proper supply of electricity from Eskom, almost the whole of South
Africa will be in darkness and come to a standstill, potentially endangering
the life, personal safety, or health of the whole or part of the population,
according to court papers.
Energy expert Ted Blom said the developments pointed to Eskom management’s
A Blackout is a total crash of the power grid to an imbalance between power
generation and power consumption, as hospital patients in Venuzuela found out
early in 2019 during a five-day nationwide blackout leaving an estimated 26
people dead. Unprepared for the sudden loss of power, back-up generators in some
hospitals failed, while others only had enough energy to keep a few of the most
vital wards functioning.
2008 Eskom controversially introduced “Load Shedding”, planned rolling
blackouts based on a rotating schedule, in periods where short supply threatens
the integrity of the grid. We have all become accustomed to the new way of
life, some companies and individuals have already adapted by been pro -active by
installing generators, solar panels and Uninterrupted power supplies to their
business premises or home’s, but a Total Black out is very different.
“Are South Africans prepared for blackouts that could potentially last
From an insurance point of view have you ever stopped to think how a Total
Blackout could affect you and your business?
If you don’t have a gas stove at home, what backup plan do you have in which to
* If you have an office with staff, what outcome would be met without the use
of computers and access to the internet.
* If you manufacture products, you will experience an interruption in your
turnover due to no output over a few days, unless you have massive generators
with plenty of fuel.
* Not to mention businesses and homes that are vulnerable to theft/burglary due
to the alarms system not been functional. (if a policy condition)
We have been asked the question “Does my insurance policy cover me against
Total Blackouts?”, so let’s take a look at the Business Interruption
section of a typical business policy as well as the extension “Public
Utilities”, and what it covers – to help clear up any confusion.
If you have selected the Business Interruption section , it
covers the following defined events:
“Loss following interruption of or interference with the business in consequent
of damage occurring during the period of insurance at the premises, attached to
the Fire, buildings combined, office contents or any other material damage section
of the policy, but only in respect of perils insured under the Fire
section (termed damage).”
Trigger is a Fire, lightning, storm, flood, explosion etc, which is an insured
peril, therefore it will be covered.
There are two extensions which typically cover the failure of the public
supply of electricity to the insured’s premises supplied by Eskom.
* Public Utilities – Insured perils
This extension covers the loss consequent upon damage by Fire or allied perils
to property of a public authority providing water, gas and electricity to the
e.g Eskom has a Fire and can’t produce electricity for a few days/weeks which
The trigger is a Fire, which is an insured peril,
therefore it will be covered.
* Public Utilities – extended cover
The interruption is the same as the previous point except insured peril
is replaced with damage.
e.g Eskom has cables stolen and electricity supply is interrupted for a few
days/weeks which prevents production.
The trigger is damage to the cables, which is an
insured peril, therefore it will be covered.
However, Rolling Blackouts resulting from Eskom’s
incompetence, mismanagement, failure to maintain infrastructure or inadequate
planning is not an insured peril in terms of the Business Interruption
section of a business policy.
The mere withholding of electricity by the authorities is excluded.
In the event of load shedding ocuring merely as a result of the fact that there is insufficient capacity at the electricity generation unit, no cover will be in place.
There is no trigger, therefore the policy will not
respond and there is no cover.
If Load shedding continues and if Blackouts are looming, it’s time for each policyholder to start implementing measures
NOW, in which to prepare for the dark days ahead, should total blackouts become
the new norm.
Written by Andrew Ensor-Smith, Owner of ES Brokers
Pictures courtesy of Pixabay