A fire makes headlines when it destroys your business’ property. But, a lesser known and often more significant risk, is the damage it can do to your business entity through fire loss. Closing operations even temporarily, moving to an interim location and significant inventory loss following a disaster can threaten to shut down your organization permanently. In fact, as many as 40 percent of business that close following a disaster never open their doors again.1
The most common causes of business interruption (BI) loss are fire and explosions, accounting for over 59 percent of BI claims worldwide.2 Most frequently at the hand of human error or technical failure, workplace fires are often avoidable. Property managers can both reduce their risk of explosion or fire loss, and at the same time, secure better property and business interruption insurance, terms, conditions and pricing with the following tips:
- Plan for the Unthinkable. Comprehensive emergency response plans will provide communication guidance procedures for fire, police and local utilities. The plan should be drilled periodically, and emergency exists clearly labeled, paths well-lit and unblocked. Don’t forget to draw up an emergency vendor list, including: your insurance broker claims representative, disaster restoration/remediation contractor, a fire protection contractor, an electrician, a plumber and more.
- Practice Good Housekeeping. Don’t let dust or dirt accumulate on electrical equipment or motors and store flammable/combustible liquids in UL or FM approved cabinets. Designate outdoor smoking areas at least 20-ft. from the facility, ensure all combustibles are kept at least 36-in from electrical boxes and panels and maintain 18-in. of clearance from the top of storage to automatic sprinkler heads.
- Keep “Hot Work” Cool. Welding, grinding, brazing and cutting continue to be common causes of workplace fires. Establish a formal permit system that indicates the scope and location of hot work and conduct pre- and post-work inspections to identify potentially hazardous conditions in the work area. Provide a fire extinguisher within 25 feet or less of the work area, and implement a dedicated fire watch during all hot work and one hour past work completion.
- Make Preventative Maintenance a Priority. Have a licensed electrician perform routine inspections and maintenance and inspect your facility for visible electrical deficiencies on a routine basis. Open or damaged electrical panels, use of extension cords as permanent wiring, electrical tape repairs to wiring and missing ground prongs are common fire hazards that can easily be repaired.
- Uphold Your Fire Protection Equipment. Proper inspection and maintenance of your automatic sprinkler system continues to be one of the most effective protective measures in preventing fire damage. Make sure they are installed and serviced by a licensed, insured and qualified contractor in accordance with NFPA standards. Similarly, monitor the system with central station alarms attended to 24/7/365.
Businesses don’t think twice when securing fire and general liability policies to protect their property. But, not everyone thinks about backing their business entity, which still needs to run even if your facility is burned to the ground. Contact your HUB advisor to develop a customized property loss prevention program, including a tailored business interruption policy to meet your business’ needs.
1 The Federal Emergency Management Agency (FEMA).
2Allianz, Global Claims Review 2015: Business Interruption In Focus.