Unravelling the legal consequences of the blackout

Clear information about the causes of South Australia’s statewide blackout and floods are crucial so that individuals and businesses can make good decisions about whether to seek compensation or simply cop their losses, writes legal commentator Morry Bailes.

Oct 06, 2016, updated Oct 06, 2016
Photo: Tony Lewis

Photo: Tony Lewis

By the time you read this I hope the sun will be streaming in your window accompanied by the feeling that spring is finally in the air. At the point of writing, I look across another grey sky, threatening rain and with it further hardship for those battling flood water and the many other difficulties caused by this “extreme weather event”.

No doubt the controversy about Wednesday’s state-wide power outage will continue to reverberate. It is either all due to climate change, notwithstanding we had an event of equal severity 50 years ago, and one worse still 80 years ago, or all due to renewables, even though many commentators say our state-wide power failure was an inevitable event.

From a legal perspective I am more interested in causation. Apart from the obvious cause, which was lots and lots of lightning and lots and lots of wind and rain, the question is why we have a system that permits the entire state to lose power.

One cannot really begin to speculate about causation until all the facts are on the table but they must include the design of the system, the age of infrastructure, the actions of individuals in the design and delivery of power before and during the event, and so on.

Why is this important? Aside from that fact that every South Aussie probably wants to know whether we all need to buy generators or batteries for the next once-in-a-100 year event that seems to happen a couple of times a year now, there is the prospect of legal liability. Think of the aftermath of the Victorian bushfires and its legal ramifications. Natural disaster goes hand in hand with loss, and with loss there is the consideration of compensation.

Below are some of the routes by which one may be compensated for losses that you or your loved ones may have suffered.

Insurance is the first and preferred avenue.

As this weather has continued, our attention has turned from power failure to flood and water damage, so there is more than one type of loss to consider. In addition, insurance policies differ for individual and business losses.

In terms of individuals it is likely going to be a claim for property loss or damage brought under a house and contents policy.

For businesses, there will be property loss claims, but many are also insured against business interruption.

The thing about insurance is that although, in a broad sense, legislation exists to keep the insurers honest, each contract of insurance is just that – an individual contract. Thus terms and conditions (what is included and excluded) differ from policy to policy, and what you thought was covered may not, in fact, turn out to be so. Or there may be an exclusion.

Interpretations can determine whether you are covered or not (as was seen in the Queensland floods when insurers picked over definitions of what the loss of damage constituted – flood or water damage for example). Get your policy out now and have a good look at it.

Be aware that business interruption insurance usually kicks in after an agreed period, so you need to check your policy to determine when your cover begins.

If there is any doubt about your entitlements your first port of call is your insurance broker, and then a lawyer, depending on what is at stake.

The second type of compensation may be from statutory and local authorities, and energy providers.

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Let’s start with SA Power Networks. We are all paying a lot for our power with an expectation of uninterrupted supply, but what happens when that is not delivered?

SA Power Networks’ publishes material on two scenarios. The first is daily compensation in the event that it fails to deliver a ‘Guaranteed Service Level’, but there are ‘outs’ on which SA Power Networks may rely to deny a claim. Time will tell what it will do in the present circumstance. If a claim is denied it may be that legal advice is required.

Another type of claim is, however, contemplated by SA Power Networks and is referred to simply as ‘other claims’. It says ‘this claim for compensation is separate to the Guaranteed Service Level Payment Scheme’. Although it doesn’t spell it out, what SA Power Networks is inviting is a claim for negligence or breach of contract, or any other applicable cause of action. ElectraNet, as the provider of high-voltage power in this state, may, of course, also have a liability (perhaps the primary liability).

This is why knowing what exactly occurred here is important for all South Australians. We may all have a claim against our electricity suppliers for their failure to provide a continuous supply if they have been negligent in either the design or delivery of that supply, and there is loss.

South Australians seeking compensation ought to know why this event happened so that informed decisions can be made about how to address losses. Do we take it on the chin or are there other avenues?

Much the same considerations apply to statutory authorities and local government. A case in New South Wales, recently decided, said a local council was negligent by failing to remedy a known risk resulting in the landholders suffering loss when untreated water went all over their property. These cases are based on individual facts. To state the obvious, a river bursting its banks when it could not be foreseen is one thing. A council warned over and over again about a known risk and doing nothing about it is another thing altogether, and could be legally actionable. If you have suffered losses that are not recoverable against an insurer then you may need to seek legal advice.

Potential negligence claims are not limited to local councils, and depend on the nature and cause of your loss. But head to your insurer first.

Finally, there are government grants.

This is a moving feast. Actually that is a poor choice of words because it is anything but a feast. Grants announced thus far are really subsistence grants only. One might hope our state and federal governments may ultimately assist primary producers and industry to get back on their feet in certain circumstances, so anyone who has suffered loss ought to keep an eye out, particularly in communities hardest hit, like Port Lincoln and the lower Eyre, the Adelaide Plains and Adelaide Hills where primary production is well-established. Other businesses will also have suffered heavy losses at a point where, economically, many are struggling already. So governments may decide it is sensible to facilitate businesses’ ongoing ability to trade for the sake of the state.

Some readers may believe it’s unpalatable to raise the subject of insurance, compensation and government grants so soon after South Australians suffered this difficult event, but it is plainly necessary for us to understand where we stand. Even the most sympathetic observer must concede that our usually uninterrupted power supply has been, well, fairly regularly interrupted, and it is fair for us to know why that is so, in order to make informed decisions about how to deal with our collective losses.

So speak to your insurance brokers, insurers, and lawyers if needed. Keep an eye on government grants, and let’s keep the pressure up on exactly what happened when we all lost power so that we understand our compensation rights.

On another note entirely, as I negotiated my way through usually-controlled intersections in the early evening of Wednesday last week, trying desperately to deliver a slightly shell-shocked CEO of the Law Council to Adelaide Airport to escape what had the feeling of Armageddon about it, I noticed our police members in the pouring rain, directing traffic, doing what they do best, helping the community. I act for police so can be accused of bias, but thank you. And thank you also to every volunteer in the SES and the community who has kept our state in reasonable shape notwithstanding our challenges.

Morry Bailes is the managing partner at Tindall Gask Bentley Lawyers, treasurer of the Law Council of Australia and is a past president of the Law Society of SA. The opinions expressed in this column are his own.

His column appears every second Thursday.

Topics: blackout
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