HOW DOES LOADSHEDDING INFLUENCE MY INSURANCE COVER?

Loadshedding has disrupted our daily lives since April 2008, when Eskom attempted to reduce the demand on South Africa’s power grid by rotating the available power supply between all Eskom customers. To minimize the impact on daily activities, businesses and individuals alike have started resorting to generators, inverters and solar panels. However, these power solutions not only generate more electricity, but also more insurance headaches, as customers are unsure as to what extent loadshedding will influence their insurance cover. This article – the first of a two-part series – will shine some light on the most frequent cover concerns as to whether these loadshedding luxuries automatically form part of your building and home insurance or not.

Will my insurance cover inverters, batteries, generators and solar panels?

According to most insurance companies, customers will be insured against loadshedding losses if they adhere to the stipulated requirements. All equipment should be installed by an accredited service provider (Red Seal electrician) and a Certificate of Compliance must be issued to your insurance provider. If insurers can prove that all the above is not adhered to, consequential loss will be excluded.

Inverters that are kept inside of buildings, can be covered under the Fire, Office Contents or Portable Possessions sections – depending on the customers’ requirements. It must comply with SANS 10313- and 10142-approved requirements for protection against lightning and power surges, with those power surge units installed in the distribution board. If the inverter is a permanent fixture, the total insured building sum must be adequate.

Solar panels are not insured separately; therefore, their individual parts are most likely not insured either. However, customers should remember that any problems with the solar panels themselves, such as problems with the solar batteries, should be covered under its product warranty. If the panels are fixed to the home, most insurance providers will make provision for this under Buildings Insurance under the specified list of fixtures and fittings, and your premiums will be updated. Unfortunately, solar panels are also subject to severe weather onslaughts, natural disasters, theft and fire, and should be insured accordingly.

Generators should be insured under the Fire or Portable Possessions sections – depending on whether they are fixed or portable. They must be protected against weather conditions, stored at least 5 meters away from the building and kept well ventilated to accommodate the carbon monoxide emissions. Excess fuel must also be stored in a separate area. The amount of fuel will determine additional safety measures to be adhered to.

Ultimately, the issue of whether to insure these items under Building Insurance or Home Contents Insurance will depend on whether they are permanent fixtures to your home or business, or not. The general rule of thumb is that if it doesn’t fall out when you turn your house upside down, it should be covered under Building Insurance, while anything you can remove or separate with a screwdriver or sledgehammer, should be covered under Home Contents Insurance. It is highly recommended that you contact your insurance broker to advise you in this regard.

What if the power fails and my alarm does not work?

Customers should be vigilant about the impact that loadshedding has on security systems, such as gate monitors, cameras or electric fences. Battery backups with sufficient charging capacity will extend the working time of alarm systems during load shedding; however, it is not ideal for any battery to be subject to regular bouts of power cuts. Although wireless security systems have batteries in its detectors that are unaffected by loadshedding, the main control box contains a backup battery that should be checked and maintained. Batteries only have a finite lifespan, which is severely affected by the number of times it charges and discharges. Stage 1 loadshedding gives batteries enough time to recharge (around 4 hours), but any higher stage reduces this time and deteriorates the batteries.

During loadshedding, several malfunctioning alarm systems generate an increase of false alarm activations that impact armed response companies’ ability to deal with real emergency signals. Opportunistic individuals will take advantage of any premise where security might be compromised. According to Auto & General, there has been a 40% increase in burglaries during the first 16 days of January 2023, in comparison to January 2022. Other insurance companies have also reported a positive correlation between loadshedding and spiking crime.

Most insurance companies stipulate that individuals and businesses must always arm their security alarms when they are not on the premises. Since loadshedding is beyond customers’ control, they should theoretically not be penalized for theft-related cover if their property is burgled during a power cut – each case should be considered on its own merits. However, customers are still advised to ensure that alarm systems are working, back-up batteries are fully functional during loadshedding, and to check with their insurance companies what the specifications are regarding burglary and theft during blackouts.

Is loss due to power surges covered?

South African short-term insurers have reported an increase of 60% in claims for the destruction of sensitive electronic property as a result of power surges during loadshedding. Hence, most insurers currently insist that customers have a surge protection device (SPD), as well as other mitigating equipment – such as fire alarms and insulators – installed, if they want to claim for damages caused by power surges. These damages to home or business contents may be covered under the Electronic Equipment, Fire, Buildings or Office Contents sections at additional premiums.

Can I claim for damages due to loadshedding?

According to Santam, loadshedding itself is not an insurable hazard. Should customers own a business, they can add Business Interruption to their insurance cover, which will provide for the loss of income caused by a predefined set of threats. According to Van Deventer & Van Deventer Incorporated (Civil Litigation Attorneys), there are only three major conditions on which individuals or business may claim directly from Eskom for damages due to loadshedding:

1.      General

If consumers have a direct contract with Eskom, they may claim directly based on breach of contract. However, most customers purchase their electricity from their local municipalities, who cannot be held responsible.

2.      Breach of contract

If a customer has a direct contract with Eskom, who does not deliver the services stipulated in the contract, the customer can sue Eskom for breach of contract. However, these conditions will only apply if damages are as a result of Eskom’s negligence in carrying out its obligations, and the customer will have to provide sufficient proof thereof.

3.      Delict

Delict occurs when one party to a contract transgresses against another party to the same contract. It includes the following elements: conduct, wrongfulness, fault, causation and damage. If a customer’s claim is founded in delict, he must successfully prove all those elements to show that Eskom has caused the damage; however, the final decision will still be determined by the court – based on each individual case and its merits.

It is vital to keep in mind that the legal costs involved in these proceedings, might most likely exceed the claimed amount; therefore, it is advisable to rather be properly insured against any damages.

In conclusion

It is evident that loadshedding will remain part of our lives for many years to come, and alternative energy sources will become increasingly common in many households and businesses. These represent hefty capital investments, and properly insuring them against loadshedding, natural disasters and theft will ease your mind and mitigate your losses when blackouts hit. 

Don’t be left in the dark –contact your nearest APBCO-broker to ensure that you are properly insured and that you have taken all the necessary steps to protect your property.

*Please read our next article for useful insurance tips to consider when dealing with loadshedding.