The recent storm and flood damage in KwaZulu-Natal is estimated to be R2.5 billion and with more heavy weather warnings on the way, Minister of Cooperative Governance and Traditional Affairs Thembi Nkadimeng is calling for a state of disaster in the province. While major infrastructure like roads, bridges, railways, and schools has sustained massive damage, smaller projects are also affected, and contractors are feeling the strain.

George Parrott, commercial business partner at King Price Insurance, says that a mix of business and engineering insurance products is essential if contractors wish to protect themselves financially from the effects of extreme weather conditions. When it comes to weather-related loss and damage to construction projects, Parrott identifies two critical risk areas that contractors should insure as a starting point:

Contract works insurance: Following an event like a storm or flood, there will inevitably be lost time on site, but contract works insurance ensures that contractors won’t have to foot the bill for the material costs needed to re-instate projects to the point they were at before loss or damage that constitutes a valid claim. The contract sites, as well as the surrounding areas that contractors may need to access and which are under their control, are covered while the work is in progress. As soon as a project is completed, the building must be covered under a business insurance policy.

It’s important to note that contract works cover ideally needs to be in place before a project starts. While an insurer may agree to instate cover during a project, any claim could become complicated with regards to the merits of the loss, the claim amount, and which parts of the project fall within the scope of cover.

Liability insurance: This covers a contractor’s legal responsibility for injury or damage to third parties or their assets that arise from their construction project. After an event, like a severe storm, liability cover will protect contractors who are brought in to reinstate physical assets, like buildings against further damage that their work might cause.

Over and above this, all business owners, irrespective of their industry, should protect their office equipment, buildings, and stock in trade, against loss and damage due to natural disasters, theft, and other unforeseen events. Within the construction environment, business owners and contractors should also have plant all risks cover for their equipment.

Parrott also recommends having cover in place for special risks: “No short-term insurer in South Africa covers loss or damage due to politically-motivated malicious acts, riots, strikes or public disorders; you need specialised cover from South African Special Risk Insurance Association (Sasria) for this.” It’s easy to buy Sasria cover when you have an existing underlying policy with an insurer who is a Sasria agent. 

“There’s no one-size-fits-all insurance solution for contractors in the construction industry. It’s important to work with your broker to find the combination of products that best suits your needs, to understand exactly what is and isn’t covered, and to do so for each and every project or contract that you participate in. Failing to adequately insure your portion of the overall risk as defined in the project contract could lead to you being in breach of contract, as well as being un-insured,” says Parrott.