WITH the worst drought in recent memory crippling several parts of South Africa, travel suppliers may be shocked to learn that you cannot insure against the water crisis. You must, however, insure yourself against any drought-related property damage and public liability.
“Drought is not an insurable risk. The premise of insurance is to cover sudden and unforeseen events,” explains SATIB Senior Account Executive, Cecily Melia.
“Even if it’s not a matter of your own making, the drought is not an unforeseen or sudden matter. Losses as a direct result of drought are normally excluded from policies of insurance, unless linked to an agricultural business with the specific inclusion of cover for crops, vines, and so on.”
“The drought has been going on for quite some time now and the excuse of Force Majeure (an event that no human foresight could anticipate) cannot apply any more,” agrees tourism legal specialist, Advocate Louis Nel.
What does the CPA say?
Nel and Melia concur the Consumer Protection Act (CPA) is highly relevant in times of drought. They say in terms of the CPA and the European Union Directive, service providers must make a plan to provide their guests with the full services advertised; and must disclose before clients purchase their products/services if they are unable to fulfil that promise.
“All risks to clients must be disclosed. Not doing so means risking your income and reputation,” warns Melia. “If any information about your product – whether on your website or in your brochures – is found to be misleading, you will be challenged,” she cautions. “In addition, review your booking terms and conditions with special attention to clauses concerning cancellations and the guaranteeing of leisure facilities such as pools and Jacuzzis.”
She says substantial claims have been recorded of guests demanding a full refund because suppliers weren’t able to provide the full package promised, for example due to empty pools or guests not being able to take a bath.
“A mitigating factor may be that there is a lot of publicity in the media about the drought and therefore suppliers could argue there is some voluntary risk on the part of their clients,” adds Nel. However, he reminds suppliers that the CPA applies to all products and services sold overseas and provided in South Africa.
He advises overseas operators to get their clients to sign an indemnity form. He also advises them to give clients a short summary of the drought conditions and risks and then refer them to the relevant authorities for more detailed advice. What’s important, he says, is that a balanced message is put out, such as the South African Tourism-led unified industry message that the Western Cape is open for business, but that people need to save water when they are there.
Public liability insurance
Public liability cover – providing yourself with a legal defence – is particularly important, says Melia, “because public liability is an immeasurable risk as a guest can hold you liable for any amount, including inflating a claim with emotional considerations”.
She says suppliers must ensure that their sub-contractors – such as adventure tourism providers or tourist guides – also have liability insurance.
“Liability insurance must cover your legal liability for any injuries or sickness resulting from the provision of food and drink on your premises, for example to cover you if your guests fall ill from contaminated or spoiled water that you inadvertently may have bought from an outside supplier.”
Travel suppliers must also protect their physical assets by insuring themselves against any physical damage that may result from the drought, for example when pools crack while empty, or against increased fire hazards while water pressure is reduced. “Insurers have warranties in their policies and it’s important to establish what your property insurance policy says,” advises Melia. “Keep your insurer up to date about any additional risk management or risk reduction measures you have put in place.”
While the drought has spawned a whole lot of new entrepreneurs who are often offering services they are not necessarily qualified for, Melia says your insurance should cover property damage resulting from work done as long as ‘the reasonable man’ criterion is applied when appointing a contractor. (The ‘reasonable man’ denotes a hypothetical person who exercises average care, skill and judgment in conduct and who serves as a comparative standard for determining liability.)
To ensure that fire cover remains valid, Melia advises suppliers to establish whether any special conditions or requirements have been applied to their policies in terms of fire and smoke detection and fire-fighting equipment; and to establish whether insurers will still honour claims if suppliers have not been able to comply, due to low water pressure, water sanctions or Day Zero.
Note: Both Fedhasa and Satsa refrained from commenting on drought insurance issues, saying these were contractual issues between individual companies and their insurance brokers.