By Patrick Elston
Within hours of the roof collapse at the Nicosia Municipal Theatre, Cyprus was awash with “authoritative” rumours as to the cause of the incident and the identity of the person whose head would duly roll as a result of personal responsibility for the occurrence. As is common with gossip and rumour most, if not all, the versions circulating were the product of fertile imagination and the only story that was true was that there should and would be an official enquiry. Until the conclusion of a detailed technical study of the incident attempts to second guess the cause of the collapse are futile and a complete waste of time.
When the amateur engineers had exhausted their speculative efforts they were quickly followed by even wilder stories as to the insurance position relating to the theatre. This gossip was mostly based on the common misconception that any incident involving damage would be covered by the relevant insurance policy. Whilst it is possible to insure almost any risk at a price, the general affordable insurance market offers standard covers which are based on financial reality. Film studios can insure a female film star’s legs and governments have been known to insure satellites, but the premiums involved are way beyond the pocket of most normal people or organisations.
I have no “authoritative” information on the insurance position of the owners/operators of the Nicosia Municipal Theatre. However, if they have bought an insurance product commonly offered in the Cyprus market, the best possible cover would be a material damage “All Risks” policy. Although this insurance is described as being “All Risks” it is expressed to cover damage (not otherwise excluded) to the insured property occurring within the period of insurance. In this context damage means sudden and accidental physical loss, destruction or damage. The words that should catch the eye above are “not otherwise excluded” as the standard All Risk policy excludes many contingencies.
Even without knowledge of the cause of the collapse it is a fact that the standard All Risks policy would normally exclude the incident as it excludes collapse or cracking of buildings or other structures. It will be seen that although there has been a sudden physical loss, which many would describe as accidental, the best insurance policy available in Cyprus excludes such an occurrence. The reason for this is that insurance cannot commercially provide infinite coverage to the insured person or organisation. To use an analogy, insurance is an umbrella rather than a wetsuit. An umbrella can cost very little but will not keep your shoes dry. A wet suit will keep you dry but may cost more than you can afford for everyday purposes.
The conclusion that can be drawn from this situation is that the time to review and study your insurance is at the inception of the policy when the insurance is first provided and not following some catastrophe, when it is too late to alter the terms and conditions of the insurance policy.
Incidents such as the theatre roof collapse can give rise to liability by third parties and the potential liability of these third parties may be insured or insurable. This could be the subject of a future article if and when the cause of the incident is established, but I am not going to fall into the trap of pre-judging the findings of the experts who are currently reviewing the circumstances and cause of the unfortunate occurrence.
Patrick Elston, MIILA; F.C.I.Arb., Solicitor, is an expert on property, marine, liability and engineering insurance. He is Director of Cunningham Lindsey Cyprus the Regional Office of Cunningham Lindsey International a worldwide Insurance Loss Adjusting Group.
