Wave of problems for firms after floods

Press, 23 April 1984, Page 10

Wave of problems for firms after floods

PA Invercargill Numerous problems have arisen for Invercargill businesses since January’s devastating floods. Lost production has led to insurance difficulties for some firms, although business organisations are not directly aware of any companies whose losses are causing severe financial strain.

Ironically, one the greatest difficulties has been increasing production in flood-damaged premises so that supplies or materials and goods are maintained to flood-damaged homes. To clear a backlog of work arising from the floods, some firms have taken on extra staff. Whitcoulls’ North Road production division has employed 20 unskilled workers to make up lost production.

The branch lost three weeks cleaning up after the floods and only returned to full production on March 29. Many firms have found they have no loss-of-profits insurance and are facing varying degrees of hardship.

Even those firms insured against loss of profit might find they will receive no money in spite of losing business through the floods, the manager of Calder Stewart Industries, Mr Paul King, said.

Because an insurance claim was assessed by comparing annual profits, it would be 12 months or more before any decision could be made, and firms who gained extra business because of flood repair work, or for any other reason, would probably not be able to

prove a loss of profits because of the floods, he said.

“In actual fact, I can’t see any firms getting anything out of loss-of-profit insurance,” he said.

The manager of Wesney and Duffy, Ltd, Mr Gavin Piercy, said it took a disaster of the magnitude of the January floods to show that some companies’ insurance cover was not as satisfactory as it should be. “I think what looked like a good cover hasn’t worked out as well as we would have wished when it was tested,” he said. “We have been in business for 10 to 12 years without having to test the insurance, and now we have found out, so it is a pretty valuable lesson.” The company had been insured for water damage and “other extraneous perils” as well as for loss of profits, and would come out “about par” with a small shortfall, Mr Piercy expected. Because the company had only been in operation for about six days after the Christmas break, and then had about five weeks loss of production through the floods, there was an enormous backlog of work. Although most clients had been sympathetic about delays caused by the floods, “the floods excuse is wearing a bit thin now,” Mr Piercy said.

Some businesses in Otepuni Avenue, an area with a history of flooding and drainage problems, found when they put their insurance plaims in that their company was not covered for flood damage because of its location.

“The insurance company had not informed people that they were not covered for flood damage — we only found out about it when we went to put the claim in,” the general manager of Kayes Kake Kitchen, Mr Kerran Larson, said.

His firm lost stock to the value of $14,000 and was put out of production for two weeks. While the EarthSuake and War Damage bmmission had paid out on the firm’s physical losses, the insurance company concerned had declined to pay out on the loss-of-profit insurance.

Similar problems are being experienced by Frank Rose Electrical in its Otepuni Avenue premises, which had about a metre of water and sewage through them.

This caused structural damage, the manager, Mr Frank Rose, said, but the insurance company would not pay because it believed the damage was caused before the floods. Mr Rose said he was trying to find a builder who could confirm the damage was flood-related, but because builders were so busy, it was taking some time to find one.

His premises also had a storm water problem and when the Otepuni Stream rose above drain outfall level, water came back up the drains and through the building. However, his insurance company is becoming wary of paying for that damage. “They have mentioned to me that they are not insuring against floods now,” Mr Rose said.

The former chairman of the Southland branch of the Otago-Southland Manufacturers Association, Mr Noel Dunlop, said some businesses which had been out of production for several weeks and had no loss-of-profits insurance could be markedly out of pocket because of the floods.

However, he had not heard of any company which had been severely affected financially.

The chairman of the Southland Regional Development Council, Mr Harold Poole, said he had raised the matter of possible business losses at the last council meeting. If any firm had a big problem for loss of plant, the council would like to hear from it, Mr Poole said.

Whether the council could help was not clear, he said, but the council was concerned that businesses maintained their trading patterns so that employment was not lost.

“If anything comes to our notice, we can look at it and see what can be done,” Mr Poole said. “But there’s been nothing come to light yet.”

While Invercargill businesses are back in production after the floods, fewer than 15 per cent of the 900 city houses inundated have been fully restored and reoccupied. As many as 300 homes are still not dry enough for repairs to be carried out, and in only about 180 cases was restoration considered to be “well under way,” according to a report from one of the assistant rehabilitation co-ordinators, Mr Bill

Watt. Moreover, it appears at least 250 city households are still living in temporary accommodation. A further 69 are living in caravans. Although the Master Builders’ Association was attempting to spread flood repair work among its members, there were cases where some builders were taking on several jobs, causing delays for people waiting to get back into their homes, the former president of the Invercargill branch, Mr David Marshall, said.

One builder is understood to have up to 40 clients waiting for attention. There was no shortage of builders available to undertake the repair work. Some had come to the south from as far as Gisborne at the request of insurance assessors, who had predicted a scarcity of tradesmen, and work was proceeding “as fast as we can get materials,” Mr Marshall said.

“We think we have ample men to cope,” Mr Marshall said.

Shortages of certain building materials and joinery, particularly doors, caused delays last month, but supplies were arriving from all over New Zealand as fast as they were being manufactured and most builders were having no difficulty in obtaining what they needed. Other delays had been due to houses being too wet to work on, but by using heaters it was generally possible to reduce the moisture content to an acceptable level in about two days.