The Ikoyi Building Collapse, Insurance and Matters Arising By Paschal Emeka Egerue

The world today is in turmoil through a combination of climatic and social tensions. Life and property are consequentially exposed to serious dangers. Protection of life and property has therefore become a major concern in the world today. This is more so for poor Africa that is very much in need of internal and external aid for property and human capital development. For this reason, collapse of buildings and its associated collateral damages are unacceptable and should be prevented by all legal means possible.  Alade and Ibadje (2021) while stating that collapse of a building could be as a result of wide-ranging “acts of God” like earthquakes, hurricanes, floods and landslides, also identified human factors such as negligence, flouting of building codes, use of defective or substandard materials, incompetence and corruption as factors accounting for preponderance of building collapse in Nigeria.

However irrespective of whatsoever causes a building to collapse, compensation for the dead, the injured and those whose properties are damaged should be provided for as a matter of priority.  Incessant collapse of buildings in Nigeria is a major thing to worry about. The most notorious in recent times is the collapse of the 21 storey luxury apartment building under construction at highbrow Ikoyi area of Lagos and owned by Fourscore Heights Limited.  Government and citizens should worry about incessant collapse of buildings for the following reasons and more:

• Incessant collapse of buildings raises a query on the competence of our builders, civil engineers and other professionals involved in the building project including the integrity of government approvals and oversight inspections to ensure compliance with stipulated construction standards and regulations.
• Incessant collapse of buildings is a setback to housing delivery in Nigeria. The consensus is that the housing deficit in Nigeria is between 17 and 22 million. It is projected that about 59.5 trillion naira will be required to cover this huge gap. The effort by private developers to close this gap through construction and sales of high-rise apartment buildings is being rubbished by incessant collapse which is causing grave doubts on the structural integrity of such structures. Potential purchasers of these apartments now see the high-rise edifices as white sepulchers and may henceforth avoid them like lepers. There is even a major investment risk to it as deposits paid for these apartments, sometimes up to 60% of value may be lost in the event of collapse of such buildings and in the absence of structured refund guarantees to the purchasers or depositors.
• Collapsed buildings lead to needless loss of lives of construction site workers. Injuries and permanent disabilities are caused to the survivors. There is no reliable statistics on victims of construction site accidents in Nigeria. This is because contractors do not report accidents to appropriate ministries or government agencies. These contractors and property developers make all manners of dubious efforts to keep gory figures of victims off the view of the public through suppression of information. It is however estimated that over 50 million Nigerians are at the risk of being killed or injured in construction site mishaps on yearly basis due to poor construction and poor safety measures. This gets more complex and more sordid if the developer also dies in the collapse and thus cause a chain of confusion as to who to hold accountable for the huge liability that evolves.
• In totality, collapse of buildings lead to monumental economic waste. You can imagine the humongous amount that was expended to raise the collapsed Ikoyi building to 22 floors. You can imagine the indeterminate structural disabilities caused to other surrounding buildings. Other things to imagine are the terrible confusion and uncertainty caused to investors in that project in addition to debts owed to banks and other persons such as suppliers of construction products and equipment. All issues associated with evacuations and searches for entrapped people including debris removal are another nightmare to contend with.

The consequential effects of a construction site accident or mishap can be classified as either direct or indirect costs. The ascertainable direct cost includes cost of insurance, medical bills, liability and compensation for third party injury, death and property loss.  The indirect costs are transportation associated or related costs, man hour losses in associated distractions, time lost in fatality investigation, downtime of damaged equipment and losses arising from site closure.

Government should understandably be concerned and embarrassed about increasing rate of building collapse and other construction site accidents. This is more so as everything points to failure of approval processes and supervisory oversight of the construction sites. Lots of questions are being asked, prominent of which is whether the building of the magnitude of the 21 floor Ikoyi collapsed building under construction was approved or not, insured or not. Apprehension on possible lack of due process in all matters relating to this gigantic project heightened the moment a letter from one of the project consultants purporting itself to have opted out of the project for reasons of alleged indiscretions on the part of the project owner in not adhering to professional advise trended in the social media. How could this have happened without quick intervention and stop work order under the gamut of building laws we have in Nigeria and Lagos State in particular.  The expectation is that a government with eagle eye should have stopped the work, condoned off the site and possibly marked it for demolition. For a recap, we have the following laws and regulations for which their existence should ordinarily make building construction in Nigeria the safest in the world – the Urban and Regional Planning Laws; Lagos State Physical Permit Regulations 2019; Lagos State Building Control Agency Regulations 2019; National Building Code 2006; National Environmental Standards and Regulations Enforcement Agency Act 2018 (as amended); Environmental Impact Assessment Act 1992; Public Procurement Act 2007, and such other laws regulating the professionals engaged in the Construction Industry such as the Builders Registration Act Cap B13 LFN 2004; Engineers Registration Act 2019; Quantity Surveyors Act Cap Q1 LFN 2004 and Architects Registration Act Cap A19 LFN 2004 etc.

Rather unfortunately, this project’s owner, Femi Osibona, died in the collapsed building alongside his workers at the site, thus leaving Government and the society with the wrong end of the stick. It certainly will now be difficult to obtain realistic information and answers to inquiries. Thus, much is now left in the realm of conjecture.  As at the last count, 44 people were said to have died and several others were injured. The list of the dead and survivors will remain uncertain as people may still be trapped in the debris.

The confusion we have found ourselves on this disaster is avoidable now and, in the future, but all hands will have to be on deck to ensure that building developers adhere strictly to regulatory and compliance requirements. It is also important that corruption is totally eliminated in compliance processes. For all economies, developing and developed, building construction is imperative. We can’t run away from it. As the world develops, such constructions get more architecturally and structurally complex and at times complicated. Changes and adaptations in building materials are also occuring from building research. Rigorous government oversight to ensure compliance with essential laws especially international covenants on health and safety at work is required.

In Nigeria, Insurance of public buildings is compulsory (S.65 of Insurance Act 2003) and so is Insurance of buildings under construction (S. 64). This Section 64 of the Insurance Act 2003 makes it compulsory that any building construction above two floors be insured and it states as follows in  S.64(1); “No person shall cause to be constructed any building of more than two floors without insuring with a registered insurer his liability in respect of construction risks caused by his negligence or negligence of his servants, agent or consultants which may result in bodily injury or loss of life to or damage to property of any workmen on the site or of any member of the public.”  S. 64(2) emphatically states that “the duty to insure under subsection (1) of this section shall arise when a building is under construction.” As for penalty for default, S.64(3) states that “a person who contravenes subsection (1) of this section commits an offence and on conviction shall be liable to a fine of N250,000 or imprisonment for three years or both.” Aside the paltry sum of N250,000 for default, the basic problem here is that the fine for default must follow prosecution and conviction and not by mere regulatory sanction. This prescription of the law takes a lot of time to achieve within the Nigerian judicial system. In the case of the collapse of the Ikoyi 21 storey building under construction, the property developer died in the collapse. The Latin Maxim is mors omnia solvit which means death dissolves all things. This will also be so if the liability is in a juristic person (eg Fourscore) if it is bankrupted as a consequence of this collapse.

Until the issues surrounding ownership and domain of liabilities in this Ikoyi 21 storey collapsed building are made clear, we can only but advise that there are a broad range of insurance policies which offer protection during construction of buildings. However, as evident in the Insurance Act 2003, the major focus of the law is to ensure that project owners are adequately protected to offer compensation against liabilities arising from death or injury to workers at site and third parties including property damage. By taking the mandatory insurance cover, adequate compensation is assured the workers and third parties for accidents including collapse that may occur.  Outside this, other insurance covers are merely essential as prudent measures to protect the project owner and his contractors against financial liabilities that could arise from several sources such as creditors and other claimants. Generally, incidents or sources of risk in building constructions can be from any of the following:

• A person’s relationship with the project ( eg, are you a contractor, sub-contractor or the property owner?).
• the entity that ought to buy Insurance and in what capacity (individual or corporate).
•  the type of project/building construction to be covered (insured). This will entail technical evaluation of drawings, materials testing, soil and foundation related appraisals including environment impact assessment (EIA). All these can be done by independent specialists commissioned by Insurance underwriters and also physical inspection by experienced risk surveyors at each stage ordered by both Government and underwriters.

It is in consideration of the above and in order not to have gaps in insurance cover that most underwriters consider it most appropriate to design insurance policies that cover so many related risks in a single package. The builders’ risk (course of construction) Insurance is one such insurance cover. This is similar to the more usual contractors all risks cover (CAR) prevalent in the Nigerian Insurance market.  Typically, the underwriting consideration in this kind of insurance evaluates whether the project relates to new construction, remodeling of existing building or whether it is a commercial property construction. Some of the properties coming up these days in our highbrow commercial areas are architectural wonders in terms of novel shapes and engineering complexity. These kinds of structures may require customized specialty Insurance covers which may be new or unknown to the market. This type of insurance covers can only be effected based on multidisciplinary risk management considerations. Risk management surveyors, actuaries and reinsurers will provide the justification as to insurability or not and on rating of elements of the risk including perils. For these complex building construction risks, Insurance protection will normally be for the building structures and various elements of it such as building materials, foundation piling, erections and other structures such as scaffolding, fencing, outdoor fixtures, lawns and other things installed by the builder and sub-contractors. The protection afforded by these essential Insurance covers range from compensation for bodily injury, death and property damage/debris removal to liabilities arising from faulty workmanship, design errors and mistakes including errors in calculating strength/quality of materials for the building. The risks of concern which could imperil the project/ investment include but are not limited to the following:

• Fire, weather impairment, vandalism etc.
• Commercial and contractors’ general liability.
• Professional liability of all the professionals working on the project.
•  Workmen compensation for injury, disabilities and death.
• Other incidental covers such as vehicles for construction, heavy earth moving equipments and employee group life assurance etc.

Concluding remarks.

When the right things are done, the society is better for it, anguish and wastages arising from collapse of buildings will be minimized. Nigeria is regrettably a poor country. All legal instruments to plug further deepening of this poverty must therefore be activated. This paper therefore recommends as follows:

• All Institutions directly or indirectly responsible for inspection and issuance of compliance certificates need to collaborate and harmonize to ensure that no gap exists in compliance. No compliance certificate should be issued without the concurrence of the other agencies. A proper sequence for this can be agreed and respected. The processes should as much as possible be depersonalized as a way of minimizing corruption that is today so much prevalent in approval processes
• The National Insurance Commission (NAICOM) should within the provision of S. 64 of the Insurance Act, 2003 and the inherent powers in its establishment Act set up and fund a Building in Construction Compulsory Insurance Compliance Agency. This Agency will have the power of onsite inspection of insurance compliance documents and to prosecute defaulters including issuance of stop work orders. The present law (Insurance Act 2003, S.64) is unhelpful because the regulatory agency has to obtain conviction in court before imposing fines and sanctions as stipulated in the law. Anything otherwise can be successfully challenged by the project owner/ developer or contractor and counter claims slammed on NAICOM. Litigation process in Nigeria is at snail pace. All these make the law ineffectual and leaves the society with the short end of the stick.
• The government should be the insurer of last resort in hopeless cases like the collapsed 21 storey Ikoyi building where even the developer died in the mishap. This is with respect to paying the uninsured compensation for injury, death and property damage to site workers and third parties.
• In furtherance of the above, every developer of property who is within the contemplation of S.64 of the Insurance Act 2003 should be mandated to keep off site, daily manifest of workers at site for the duration of the project.
•  Finally, the Insurance Act 2003 is long overdue for amendment or repeal and reenactment. This will cover all identified gaps as well as bring the penalties for defaults on compulsory insurance to a realistic level. The government and the insurance industry need to be proactive and not reactive.

Paschal Emeka Egerue, ACII, FIIN, FCIB, M.Sc. MBA, LL. B (Hons), is a Lagos based Insurance and Management Consultant.

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