Rise in building collapses highlights importance of liability requirements
The rise in building collapse incidents across South Africa has brought to the fore, the very real health and safety issues facing those operating in the construction industry, particularly from the perspective of where the liability for such incidents resides.
This is according to Simon Colman, Underwriting Executive at Stalker Hutchison Admiral (SHA) Specialist Underwriters, who says liability cover is primarily in place to ensure that the responsible party is able to pay for the injuries if they are liable, while also ensuring that the parties who aren’t liable can defend themselves. “Liability claims can run into millions of Rand - a recent engineering Professional Indemnity claim exceeded R50m, highlighting the fact that a small building company could even face liquidation as a result of liability claims if no effective cover was in place.”
The last large collapse which involved loss of life was the Tongaat Mall collapse in KwaZulu-Natal which took place in November 2013. “The defence costs alone can run into many millions in part due to the necessary appointment of legal and engineering experts to establish the cause of the failure and to provide representation at various disciplinary and civil hearings,” says Colman.
When a building collapses, there are questions regarding who is liable for the accident: the building contractor, the architect, geo-technical contractors, the slab engineer or perhaps even the property owner, he says. “It is uncertain which of the parties involved will be responsible for the damage to the building and surrounding property, as well as injuries to workers and any other parties. As a result, it is imperative that all these parties have effective cover in place.”
The construction industry (like other industries in SA) also has to deal with the impact of legislation such as Compensation for Occupational Injuries and Diseases Act (COIDA), says Colman. “Navigating the COIDA procedural landscape may also be difficult for employers and employees. The employees of the construction company will not be able to sue their employer as their rights to do so are extinguished by the COIDA. Their primary recourse in the employment context lies against the COID Fund. However, the benefits of COIDA are capped. Therefore, the legal representatives of the employees will seek recourse from the parties who are not the employer such as the property owners and the professional services team.”
Colman explains that liability based insurance cover responds to the threat of litigation and covers defence costs, as well as costs associated with damages. There are five main types of liability cover required for a building site including:
- Public Liability - for the property owner to cover any damages/injuries caused to members of the public as a result of the building site;
- Contract Works Insurance- Whilst this is not classified as liability cover, it does allow contractors to cover damage to the property being worked upon caused by contractors;
- Contractors Liability - for the contractors to cover property not being worked upon and resultant bodily injury/death claims;
- Single Project Professional Indemnity - for the professionals (architects, engineers, project managers); and
- Personal Accident - for the employer to cover costs associated with injuries to the workers on site.
“For large projects it is often the responsibility of the principal to arrange the cover on behalf of all the contractors, which best ensures cover is in place. However, this is not always practical on the smaller jobs, so the owner of the property or principal contractor should ensure that any subcontractors have adequate insurance.”
Due to the complexity of liability cover it is very important to try and control the insurance elements of a contract by using one broker, with as few policies in place as possible, to cover the entire contract, advises Colman.
He says it is also important to note that if property owners or contractors proceed with construction that does not have the required regulatory approval, they may be negating any cover available under their liability policies.
“While adequate liability cover cannot prevent tragedy, it can ensure that all parties are properly compensated for their losses or injuries to best ensure proper recourse is not an issue following a terrible accident,” concludes Colman.
