Any business planning to undertake a large construction project will need to give a good deal of thought to the type of insurance policy that they require. One of the most significant considerations for an insurance company when underwriting a large construction project, is the risk of fire. In 2012, the Fire Safety Advice Centre calculated that there were 11 fires on construction sites every day.[i] Construction fire can be a serious safety risk for personnel or others in the locality. Construction fires also have the potential to cause financial ruin for a company and it is vital to have plans in place to reduce the risk of a fire occurring and to mitigate any damage if a fire does happen.
- Reduce the risk [ii]
There are a number of documents available that highlight best practice for fire safety on construction sites. One of the most significant is the Joint Code of Practice on the Protection from Fire of Construction Sites and Buildings Undergoing Renovation. This is now in its 9th edition and some insurance companies require adherence to this in order to insure a large construction project. The Health and Safety Executive has also provided a document (HSG168) to deal in depth with the issue of construction fires and ways to reduce the risks. It will be important to study this document in depth before undertaking any construction work. The paper highlights a number of ways to reduce the risks, including (but not exclusively);
· Identify the risks. Every fire needs a source of oxygen, a combustible material and an ignition source. Be aware of the sources of these three hazards and take steps to remove them where possible and to separate them from one another where not.
· Reduce sources of ignitions. This may include banning smoking from all areas of the construction site, having detailed risk assessments in place for any hot work such as welding and turning off equipment when not in use. Any sources of ignition that are required can be kept locked away, in a fire proof area, well away from combustible materials.
· Reduce fuel sources. Use less flammable materials where possible and do not allow piles of rubbish to build up. Practice safe storage of flammable liquids and gases.
· Reduce oxygen sources by a carefully planned ventilation system (closing doors and windows when not in use) and carefully managing the storage of any oxygen cylinders that may be required during the construction works.
· Reduce the potential for arson, by securing your site properly and having security measures in place.
· Ensure you have a good fire escape plan, understood by all employees and practiced as appropriate.
Consider Your Insurance Carefully
Having the right insurance cover is vital in mitigating the potential devastation caused by a construction fire. When there is more than one party involved; as in the case of business owners and contractors, it is essential to determine where liability lies. This can be a complex issue, but it is one that is worth getting right before construction starts.
· Joint policies. In the case of a fire, insurance companies can be tied up in litigation for long periods, while trying to assess who is at fault and liable for the costs. One way to avoid this is to have a joint insurance cover, taken out to cover the construction work, so that any damage will be paid by the insurance company without placing blame on contractor or employer. However, taking out an insurance cover with another individual or company can be a risk in itself. You will need to be clear on the clauses in place which may limit pay out if either party has broached the terms of the policy. In addition, after a claim has been made in the aftermath of a fire, insurance premiums may rise dramatically, even for the party who was not at fault.
· Waivers of Subrogation. Waivers of Subrogation may be an aspect of your joint policy. It sees the parties relinquishing the right to sue one another (or be sued by the insurance company) for damages in the event of that party being at fault. It has the benefit of reducing possible conflict between an employer or a contractor in the case of a claim, allowing a pay out to be made more swiftly. It also has the advantage that if a mistake is made on your part, the other party cannot later sue you. However, it involves an element of trust (that the other party will work responsibly and avoid fire risks) as in the event of an accident it can increase future insurance premiums for the party that is not at fault.
· Business Interruption. Look at what your insurance will cover you for, in the event of a fire. It may not be enough for the insurance company to simply cover the costs involved in rebuilding. You may also need business interruption cover, if it is possible that you will not be able to continue to trade while building is in progress, or if commencing trace will be postponed. There will be lots of other things to think about in terms of what your insurance company can and cannot insure – speak to your specialist insurance broker about your needs and requirements.
Employ the best
Ensure that the contractor you are using will be following all regulations and best practice codes. They will need to be accredited by all relevant industry standard bodies and come recommended, with a good history of risk management. Discuss insurance with them in detail and ensure that you and your insurance broker are happy with the insurance policy that you decide upon.
In Conclusion: What steps should you be taking?
· Reduce your risks – read all relevant documents to ensure that fire safety measures are in place
· Choose your contractor carefully – ensure that they have recommendations and all appropriate accreditations.
· Get the best insurance cover you can - talk to your specialist insurance broker about how you can best protect yourself. Talk to them about any concerns and consider raising your premiums to guard against risk.
[i] Small Construction Sites: Firesafe.org.uk. 2011. Small Construction Sites: Firesafe.org.uk. [ONLINE] Available at: http://www.firesafe.org.uk/fire-safety-on-small-construction-sites/. [Accessed 05 July 2017].
[ii] Information for this section is informed by the HSE. HSG168, 2010. Fire Safety in Construction. 2nd ed: Health and Safety Executive. – We would recommend a full reading of this document when developing a fire safety plan for your construction project.