Mining in South Africa is primarily conducted through alluvial, opencast, and underground mining methods, with underground mining generally being the most capital-intensive.

How often do we hear or read about accidents occurring in underground mines? When such incidents occur, they often result in injuries or fatalities involving employees and other persons working underground who become trapped or are affected by events such as explosions, fires, or flooding. Despite stringent health and safety legislation and compliance requirements within the mining industry, accidents do occur. These incidents are invariably traumatic experiences for everyone involved.

Out of sight, but not out of risk

When it comes to construction plant and equipment operating in underground mines, the considerations differ significantly from those relating to human life and safety. This is where Consort focuses on the highly specialised equipment, mobile plant, and tools operating within this sector.

The risk of loss of or damage to plant and equipment used underground is generally regarded and rated as significantly higher than that of similar equipment operating above ground. Furthermore, the severity of underground losses can be substantially greater and more complex, depending on the circumstances.

Cost of getting equipment back to surface

Partial losses in underground mines can often be addressed by recovering the plant and equipment and bringing it to the surface. Alternatively, repairs may be carried out underground, provided that the work does not compromise any health and safety regulations.

It is important to bear in mind that some of this plant and equipment may be operating several kilometres below the surface. Accessing such equipment is therefore a major consideration in itself, and the cost of recovery can run into hundreds of thousands of rands. This highlights the importance of ensuring that the Cost of Recovery extension under a typical Plant All Risks (PAR) policy provides adequate cover.

What happens when recovery is impossible?

In the case of a total loss, recovery may, in certain circumstances, be virtually impossible. This inevitably leads to the abandonment of the item, particularly where access is not feasible or where recovery becomes uneconomical. It is important to recognise that some insurers may exclude abandonment under their Plant All Risks (PAR) policies.

This raises an important question: what happens if the item is subject to a finance or rental agreement under which other parties have a vested or insurable interest?

Are policy limits sufficient for underground operations?

One of the most critical considerations when insuring underground construction plant and equipment is understanding the restrictions or limitations imposed by insurers. Policy wordings should therefore be carefully scrutinised. In addition, insurers may only be able to offer a maximum single-item limit together with an aggregate accumulation limit for any one mine.

The industry has experienced a number of significant losses in underground mining operations, ranging from explosions and accidental damage to large-scale flooding. A continuous mining machine, for example, valued at several million rand can be written off as a result of an underground collapse or flooding severe enough to render it beyond repair or recovery.

When flooding turns into a multi-million-rand loss

Flooding presents a particularly serious challenge when large sections of a mine become inundated. Plant and equipment may remain submerged until water levels subside or until the mine is able to pump water from the affected areas.

While the damage may initially be regarded as a partial loss, the actual cost of recovery and repairs can frequently amount to several million rand.

Liability risks that cannot be ignored

Another major consideration is the site liability exposure associated with construction plant and equipment operating underground. Even a relatively minor incident involving liability in an underground mine can result in significant legal consequences, not to mention the direct exposure to loss of or damage to property and equipment.

Is your client’s PAR policy fit for purpose?

It is essential to ensure that a Plant All Risks (PAR) policy specifically provides cover for underground operations, as this is often accommodated by way of an endorsement or extension to the policy.

Partnering with specialists

At Consort, we are able to assist with the underwriting of plant and equipment operating in underground mines. Our Plant All Risks (PAR) wording contains minimal restrictive conditions and is widely accepted throughout the short-term insurance industry.

Our experienced underwriters understand the unique risks associated with underground operations and are well equipped to assist Brokers and their clients in securing appropriate and effective insurance solutions for this specialised environment.

Consort Technical Underwriting Managers