The following article on the current state of the building sector – of which HVAC is a key component – was written by Jonathan Kaiser, manager at SHA Risk Specialists This is Part 1 of a two-part series.
Jonathan Kaiser, manager at SHA Risk Specialists. SHA Risk Specialists
In George, thirty-four people died when a partially completed five story residential building collapsed. This event is tragic, and albeit the worst building disaster in South Africa, is by no means an isolated incident of professional incompetence. Whenever disasters of this magnitude unfold, questions are rightly asked around why disasters of this magnitude persist in today’s age of technological advancement and education. Are we doomed to repeat history or are we able to distil lessons and learn from them?
The building industry faces a myriad of challenges with well-known companies going into business rescue and some liquidation. It is no secret that developers push for the cheapest designs and engineers are left holding the bag when this gamble falls through. An already distressed built environment is further aggravated by adverse insurance claims, which threatens the sustainability of professional indemnity insurance within the built environment.
Jonathan Kaiser, Claims Manager at SHA Risk Specialists and his team have investigated, by analysing claims data over the last few decades, the proximate cause for prolific and severity claims against professionals in the built industry. In this article, we explore what lessons should have been learnt and ought to be re-emphasized. Insurers are in a unique position where we have a bird’s eye view of most claims and therefore can advise on trends and risks within this space.
Build cheap, build twice – design cheap, design again
This expression (borrowed from buy cheap, buy twice) unfortunately finds application in a distressed economic environment. The tender process is already fiercely competitive, leaving professionals provisioning ‘bare bones’ designs to win contracts and thereafter assigning inexperienced staff to projects with an absolute minimum number of professionals to maintain oversight and review designs. This is a recipe for disaster. Inexperienced professionals being assigned to supervise high-risk, complex construction projects due to insufficient deployment of resources is a worrying trend that has already given rise to high severity losses.
An apathetic attitude around supervision often emerges as the root cause for many avoidable errors. Supervision undertaken contractually requires professionals to inspect and ensure that buildings are constructed in accordance with the designs. Supervision does not guarantee that construction errors will be discovered, but arguably if carried out with due care, should mitigate most. Regrettably, we are seeing far too many claims where professionals appear to have, all but abandoned their oversight responsibilities. Insurance covers fortuitous loss, and if risk is courted through professionals deserting their duties, Insurers will be entitled to reject such claims. Egregious conduct of this nature, harms not only the public confidence in the built industry but it also undermines the sustainability of the insurance market to provide affordable insurance cover to professionals.
It remains inexplicable to us why professionals are reluctant to undertake geotechnical investigations. Establishing the true soil conditions is paramount to ensuring that the correct foundation is designed. Often properties move, owing to expanding or contracting soil conditions and where the foundation did not appropriately anticipate this in the design. This leads to cracks forming and structural damage. Countless engineers and building developers appear unwilling to incur the cost (miniscule by comparison to the cost of structural collapse) of a geotechnical report to ensure structural efficacy. This problem is especially rife within the residential housing developments.
Continued in Part 2 headed Peril Paralysis…
