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Load shedding increases liability risk in hospitality sector



Rolling blackouts have once again become a regular occurrence in South Africa as Eskom commenced with the implementation of its load shedding schedule this month. News that the utility is facing massive financial and operational challenges does not bode well for businesses as continued load shedding significantly increases business risks.

Not only are many companies forced to deal with an increased likelihood that equipment may be damaged and production hampered due to power surges and extended electricity cuts, but certain industries are also experiencing an exponential rise in their legal liability exposure. 

Simon Colman, Executive Head at SHA Specialist Underwriters points out that the magnitude of liabilities faced by certain businesses as a result of load shedding, in many cases far outweigh their risk of accidental damage to their assets. “Nowhere is this more apparent than in the hospitality industry, and it is clear that businesses in this sector need to start considering a host of new risk management measures if they are to avoid potentially crippling liability claims.”

For example, restaurants need to be covered for liabilities towards their customers, in the event that patrons contract food poisoning or if there is an accident in the restaurant. “The liability claims against a restaurant in the event that a customer suffers an injury can run into millions of rand.”

He goes on to explain that load shedding increases the liability of the restaurant owner significantly. Starting with food contamination risks, Colman states that restaurants need to have a policy of throwing out food that is in the process of being cooked when the power goes out, and understand exactly what the standards are regarding refrigerated food. “Food that is halfway cooked when power is lost, should automatically be considered contaminated, and should be discarded. Vegetables, meat and dairy products all have different contamination exposures brought about by changes or interruptions in the cold chain when refrigeration equipment is turned on and off. Business owners should be aware of these issues to avoid food poisoning issues.”

Colman says that customers and employees are also at risk of injury if the lights suddenly go out. “Always have emergency lighting and flashlights available in designated areas where staff can easily reach them – otherwise there is a risk that kitchen staff or customers could be severely injured on your premises, possibly leading to liability claims.”

Another liability risk that is often overlooked is that of spread of fire. Whilst property insurance will cover damage caused by fire on the business’s own premises, if the fire spreads to third party property, the damage can be immense. Think about a restaurant that rents space in a large shopping centre. If electrical heating and cooking equipment is left on during load-shedding, when the power supply returns, that heating equipment turns on automatically and presents a serious fire hazard. This could lead to the entire shopping centre burning down thereby attaching liability to the restaurant.

Lastly, Colman advises that restaurant owners need to chat to their brokers to ensure that their liability policies are up to date and as comprehensive as possible. “Being unprepared for extended power cuts is quickly making its way to the top of the list of perils for the hospitality sector. Restaurant owners need to take note of this and make sure they have a plan to manage this risk, backed up by adequate liability cover to make sure their business can survive any eventuality,” Colman concludes.