The Hawkes Bay water crisis could soon be drawing to a close. Thousands have been affected either directly or indirectly, personally or commercially. But the cause of the water contamination in Havelock North and Hastings in August 2016 is still not known.
What lessons are there for the business operators who assumed someone else would pick up the costs?
What happened to the Hawkes Bay water?
In August 2016, residents of Hawkes Bay began to get seriously ill. People started suffering from severe gastric illnesses and over 100 students at Te Mata School called in sick. Some headed to hospital. The water was chlorinated shortly after and a boil water notice was issued, but not before a significant amount of damage was done to the populace. Most of those who were ill were suffering from campylobacter, and businesses that relied on a safe water supply had to cease operations.
As a result, Havelock North was brought to a standstill, and local businesses are still waiting for a government inquiry to confirm the cause of the contamination.
Why weren’t businesses covered by their insurance?
From an insurance perspective, there is little chance of any businesses being able to claim their loss of income resulting from this event due to the standard exclusions to most insurance policies.
Business interruption insurance provides cover for the loss of revenue, profits and pays fixed expenses following an insured event. However there are exclusions in all insurance covers, this means there are certain things that are not covered by the policy.
Most Business Interruption policies do not insure business interruption in connection with:
- Infectious Disease
- Seepage, pollution and contamination
There could be cover for events like this in a couple of cases:
- Acts of Civil Authorities – if he civil authority e.g. Council orders businesses to close due to a say a defect in the water or sewerage systems
- Failure of Public Utilities
However, in the August event the council did not order businesses to close and there was no failure of public utilities.
Stand down period when there is cover
If the event was covered business operators would face a ‘stand down’ period before the policy would respond. Stand down periods are a minimum of 24 hrs. Businesses would need to show that their turnover was affected by the event by providing evidence of historic comparable sales.
So who is liable?
Resource Management Law Association former president Martin Williams says “Legal liability will rest on what's caused this, and whether there has been some breach of common law or a statutory obligation.”
“It is possible no one is to blame. The fact that there has been such a significant health and downstream commercial implications for these business owners, doesn't mean that anyone's actually done anything that would breach a statutory obligation or be negligent.”
If the government enquiry finds that the contamination is clearly attributed to someone's negligence, there is a slight chance that businesses could recover their losses and costs from the negligent party.
In the meantime the inability to claim for the foreseeable future has some businesses relying on grants given by Council to stay afloat, or just having to pay for the loss out of their own pocket.
About the AuthorName: Kim Matthews
I’m the Leader Business Development & Sales for Rothbury’s Hawke’s Bay branch. I commenced my insurance career in 1980, have an insight in to how underwriters and assessors work and I’m a business owner myself - all great…
I’m the Leader Business Development & Sales for Rothbury’s Hawke’s Bay branch. I commenced my insurance career in 1980, have an insight in to how underwriters and assessors work and I’m a business owner myself - all great skills and experience that make me the broker I am.
I love dealing with people and I’m passionate about insurance!Close