Although bushfire season is here, this risk is only one of a host of different sources of fire. Arson is often the cause of fire and poor maintenance standards are another serious fire risk for businesses.
For instance, damaged or old electrical cabling is all too often the cause of a fire, especially in older buildings.Â Another problem, says Michael White, Steadfastâs broker technical manager, is incorrect storage of flammable materials.
âToo often, fires are caused when flammable materials are not safely stored, or they are stored with non-flammable materials. Expanded polystyrene or EPS is an especially serious fire risk,â he explains, adding âthat’s a very common issue that comes up in commercial buildings, particularly in food processing industries.â
These panels are commonly used in areas that are refrigerated such as cool rooms. While refrigerators are not typically flammable, if a fire does occur in a cool room, EPS panels help the fire to spread. And they are very hard to extinguish once they are alight.
âInsurance policies respond in different ways when a fire occursâ
Poorly maintained fire protection systems are also often found to be the cause of a fire. This was the case in Melbourneâs Neo200 building. The buildingÂ experienced a significant fireÂ in February 2019 that was started by a smouldering cigarette.
Subsequently, many issues have been uncovered in its fire protection system. A report has found fire alarms did not work, and there were not enough fire-rated doors. Additionally, a flat battery was found inside the buildingâs fire indicator panel.
Worse, the ownerâs corporation had spent $30,000 a year on fire reports and issues related to the buildingâs fire safety had been raised and ignoredÂ at council level. After the fire, the residents had to be evacuated for 11 days. While the building did have a small amount of combustible cladding, this was not involved in the fire, which damaged six units.
âThe lesson from this fire is the importance of maintaining a buildingâs fire protection system. The system must be regularly checked. Itâs not enough to examine fire protection systems sporadically,â says White.
âThere must be documented procedures and systems in place for managing the fire protection system,â he adds.
Insurance policies respond in different ways when a fire occurs. If the fire is a result of arson and the building owner is found to have started the fire, the policy usually wonât pay out. But if arson is the result of a third party the policy is likely to respond.
Itâs also important to understand whether the sum insured under the policy is adequate. In the event of a fire, policies typically cover reinstatement or replacement, but they wonât cover the buildingâs entire value.
âInadequate insurance cover is often a problem in the event of fire damage,â White explains. Itâs also important to have the right level of business interruption cover so that if there is a fire, the risk of the business failing because it canât operate is reduced.
To help ensure the claims process is as smooth as possible, ensure records of the fire protection system are properly maintained because insurers will require evidence of this.
âThe more information you can present at an earlier stage, the better off you will be. Polices can also cover claimsâ preparation, which is the cost of retaining an expert to prepare the claim. Itâs important to make use of this feature to give you the best chance of the claim being paid,â he adds.
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