Earlier this month, a bus caught fire inside Africa’s longest road tunnel, the Huguenot Tunnel. The flames were sorted out “chop chop”. The traffic, not so much. Like a braai without firelighters, everything smoked for about two weeks.
For most drivers, it meant longer trips and irritation. Still, we are South Africans. We do not sit still. We find another road, dodge a few potholes and carry on. Ja well, no fine. However, for businesses relying on the N1 link between Worcester and Cape Town, it was far more than an irritation.
Who carries the cost?
The Huguenot Tunnel temporary closure exposed how easily normal operations can unravel when shared infrastructure fails. It also revealed how such failures can cause serious financial loss.
The closure slowed freight traffic, lifted fuel use, delayed deliveries and tied up cash flow. Consequently, business owners began voicing their frustration. Many asked the same question: who pays when a public asset goes offline?
Responsibilities in the chain
SANRAL operates the tunnel and could face liability if poor maintenance or slow response caused financial loss. Courts have already held road authorities responsible for hazards such as potholes. Some of these cases exceeded R15 million.
The bus company’s motor liability cover may respond if investigators prove negligence. On average, motor liability limits range between R2,5 million and R20 million. This may be inadequate for disasters like the Huguenot Tunnel temporary closure, especially where multiple claimants are involved or if the cover is limited to the annual aggregate. This aggregate means the policy will not pay more than a set amount in twelve months.
Other businesses, such as trucking firms, fuel depots, food producers and tourism operators, often cannot recover anything. Their property was not directly damaged, which means standard business interruption policies do not trigger.
One word and one risk advisor can make all the difference
In insurance, one word and one risk advisor can make all the difference. The “Prevention of Access” and “Prevention of Access (Extended Cover)” extensions of business interruption cover, which are freely available in South Africa, differ by only one word. Yet this difference often causes confusion among clients and insurance practitioners.
In the case of the Huguenot Tunnel temporary closure, one word can make a huge difference in coverage. For Prevention of Access – Basic Cover, the policy uses the term “insured’s premises.” This means cover usually applies when insured physical damage occurs within a 10 to 20km radius.
The damage must prevent or hinder access to the specific business location listed in your policy schedule, such as your shop or office. This reduction in turnover qualifies even if your premises are not damaged.
For Prevention of Access – Extended Cover, the policy uses only the word “premises.” This covers insured physical damage within a 10 to 20km radius that prevents or hinders access to your business’s physical location. Both clauses usually require the damage to be of a type covered under your assets insurance policy, such as fire or flood. The damage must also cause a reduction in turnover by affecting your premises’ access or use, not just general business disruptions.
These extensions are often sub-limited. Therefore, for broader off-site risks such as damage to a supplier or customer’s premises, even far away, separate cover extensions are required.
The takeaway for policyholders is simple. It is essential to read and understand your insurance contract. If reading lengthy policies is not your thing, find a professional risk advisor to guide you.
Where standard policies fall short
As mentioned earlier, business interruption cover usually applies only if your insured property is damaged. Since the tunnel is not your property, any consequential loss claim fails from the outset.
Denial of access extensions helps in some cases. However, they come with radius limitations and other damage conditions that not all businesses meet.
These extensions usually:
- Have a radius limit (damage must occur near the premises, often within 20km).
- May be limited to an insured peril, like fire or flood, that affects access.
- Have losses capped at a set time period.
- Include a monetary sub-limit.
Lessons from previous disasters
I recall when Chapman’s Peak closed for three years back in 2000. Three years in South Africa equals two elections, a few cabinet reshuffles and at least one new Eskom CEO. This closure caused some businesses to collapse. It was not insurable since no insured physical damage occurred to insured assets.
Another example occurred during the 2022 KZN floods. Large insurers like Tokio Marine paid claims and then sued local authorities for R6.5 billion, alleging poor maintenance. The lesson here is clear.
Subrogation only works when your insurance pays first. Without that payout, you carry this catastrophic cost alone.
Enter CBI
Contingent Business Interruption (CBI) insurance exists for scenarios like the Huguenot Tunnel temporary closure, where damage occurs to facilities or utilities you rely on but do not own. This causes a reduction in your turnover.
Few South African firms include it. Often, it costs more, is not explained properly, or is not offered during risk analysis. Some CBI extensions may also be time-capped to 90 days or even shorter periods.
Any skilled risk advisor will encourage clients to insure CBI extensions to the full extent offered by the South African insurance market. No one has a crystal ball. Who knows when or where the next Huguenot Tunnel temporary closure will be?
Steps worth taking
- Map dependencies. Identify roads, ports, suppliers and utilities that underpin your business.
- Ask direct questions. What happens to cover if the N1 shuts for a month? If Durban Port closes again? If a nearby power substation is damaged?
- Take the widest business interruption cover. Conduct a proper risk analysis with a professional. Extend radius limits, and check sub limits and sums insured.
In conclusion
When insurers pay, they usually pursue negligent entities through litigation to recover their financial outlay. Without a valid liability claim, those entities end up funding lawsuits and facing heavy financial judgments from our courts.
Infrastructure failures will keep happening. South Africa’s maintenance backlog exceeds R420 billion. Climate and other emerging risks are not slowing down.
The Huguenot Tunnel closure lasted for about two weeks, and then reopened, smooth as ever. South Africans sighed, smiled and hit the road. Same bakkies, same potholes, same patience. We moan, we fix, we braai.
However, for South African businesses, the next Huguenot Tunnel temporary closure or similar event could last many months or even years. Protecting your business means shifting from hoping someone else pays to ensuring your policy performs. There is only one way to achieve this: through ongoing, proper risk analysis.
Tim Chadwick | CEO | Chadwicks | mail me |
