Impressive numbers: real estate companies, owners of offices and warehouses, shopping centers, catering services and hotels are all exposed to frequent fire risk.
In the US, in 2015, the fire brigade intervened to extinguish 1.345.500fire cases a year. The damages were enormous: who lost his lives, many people burned, $ 14.3 billion in direct damages and business interruption.
And in Europe? The data reported by the Fire Safe Europe Organisation, based in Brussels, are alarming: 4,000 deaths annually; 70,000 people a year are hospitalized due to burns. The damage amounted to € 126 billion, 1% of European GDP. The European Commission is ready to take preventive action.
What can we do to protect our business from fire risk? Let’s see five specific cases.
1. Mark lives in Prague and owns an hotel in the historic center and other offices in town.
Question: «In case of fire, does the insurance pay me all the property value?»
Answer: It depends. First, it is important to avoid unnecessary and dangerous under-insurance, and update the sums insured. We need to take in high consideration that often it is covered only the “reconstruction value” ; while should be suggestable to put under coverage the “new value” of the building.
In addition to business fire insurance it is suggested to buy a specific Third party Liability insurance, to cover the property’s owner exposure. Therefore – repetita iuvant – you should always contact an expert and not leave anything to chance.
2. John owns, in Budapest, a large business area: every day are at work more than one hundred people in real estate offices, shops, warehouses, suppliers, gyms, food and beverage outlets, stores of fruits and vegetables.
D: «If one of my warehouses takes fire and there are damage to properties and people, am I covered? Does the Third Party Liability cover?»
A: You have to distinguish case by case. The Third Party Liability insurance covers only damage to things and people outside our business. Our tenants, to whom we have leased part of our properties by contract, can be covered against this risk buying on the market a specific insurance.
Q: «What happens if I suffer damages from one of my tenants? Let’s say it is the tenants who causes a fire in one of my stores: who pays in this case?»
A: Fires due to a malfunction of kitchenettes, microwave ovens and heating systems (see graph below) are among the most frequent. It is suggested to contact immediately the tenant and to check whether he is covered for damage to our property.
3. Frank has decided to expand the production by buying a new plant in Poland.
Q:«I recently succeed as new owner of the entire property. I dont’ find the old insurance contracts, no one tells me anything. What can I do?»
A: Before you sign a new fire insurance on a building, it is important to report to the insurance company:
- the year of construction;
- the percentage of construction of the building materials;
- the fire resistance class.
As discussed in a previous article, it is known the case where the insurance company refused to pay a big fire claim, because there was no information about the construction materials of the production plant which has been completely destroyed.
It is advisable to make an appointment between the insurer and an independent appraisal company, with the support of a risk manager.
4. Stephan owns some warehouses in Slovakia, in which other firms operate on behalf of large multinational companies.
D: «If as a result of a fire my properties were declared unfit for habitation for a long time, I cannot collect anymore the rents’ profits: does the fire policy pay me?»
A: It does not. The company fire insurance policy pays the value of the property damage only. Loss of rents are not considered as “direct” damage but “indirect” loss. In this case it is important to buy a specific coverage against this risk.
5. Andrew owns a production plant in Czech Republic.
Q: «If I’m hurting inside my premises, for example in my warehouse, am I covered by the Third Party Liability insurance?»
A: You are not. The business insurance provides cover for employees only. You should buy an accident insurance which covers the owner and his family members while they are working in the company.