Fire! Getting insurance right demands professionalism

By: Melita Thurling, Product Champion General Liabilities, ITOO Special Risks (Pty) Ltd

The recent fire that claimed the lives of 3 firefighters in The Bank of Lisbon building in Johannesburg highlights the need not only for adequate fire or assets insurance but for liability insurance as well, warns Melita Thurling,  General Liabilities Product Champion at ITOO Special Risks

Briefings held after the fire suggested that the building was only 21% compliant with occupational health and safety standards, against a norm of 85%. Feedback from firefighters indicated there was that there was no water on some of the floors and on others the water pressure was low. Unfortunately, this situation is not unusual and there are many such dangerous buildings in the inner city. (source:  EWN eyewitness news)

Our dry climate has meant a high risk of fires in rural areas and we have legislation that caters for the liability aspects in the National Veld & Forest Fire Act, No 101 of 1998 which reads:

If a person who brings civil proceedings proves that he or she suffered loss from a veld fire which:

  • the defendant caused; or
  • started on or spread on or spread from land owned by the defendant

the defendant is presumed to have been negligent in relation to the veld fire until the contrary is proved, unless the defendant is a member of a fire protection association in the area where the fire occurred.

Despite the presumption of negligence (unless you are part of a fire protection association, there will be presumed negligence on your part for a veldfire), the plaintiff still has to prove that the act or omission by the defendant was wrongful. A reasonable landowner is not obliged to ensure that in all circumstances a fire on his property does not spread beyond its boundaries. They simply have an obligation to ensure that he has taken reasonable steps to prevent the veldfire from occurring and spreading.  If, despite reasonable steps, a fire still spreads to adjoining land, the landowner is not negligent. (source: MTO Forestry (Pty) Ltd vs A H Swart N.O. (420/2016) [2017] ZASCA 57 (22 May 2017)

So much for the countryside –  what about the city?

Densification is a term commonly used by planners, designers and developers to describe an increasing density of people living in urban areas, and is becoming far more prevalent in towns and cities as ground space remains the same but the population and its needs increase. With pressing accommodation needs, politicians, developers and planners are looking to squeeze in more people and more  units per square metre, wherever possible. This can lead to unsafe building methods and the use of unsafe buildings.

GRENFELL ILLUSTRATES

The Grenfell Tower fire in London just over a year ago is an illustration. The fire engulfed a 24-storey social housing block killing approx. 80 people. Police said the fire started in a fridge freezer made by a subsidiary of U.S. company Whirlpool and have been investigating whether the tower’s cladding, made by U.S. firm Arconic Inc., played a role in the spread of the blaze.

Fears among investors that companies linked to Grenfell could be sued for large sums in the United States hit their shares. Whirlpool’s market value fell about $250 million when police identified the maker of the appliance as Hotpoint, a brand owned by Indesit, which is a subsidiary of Whirlpool. More than $1 billion was wiped off Arconic Inc.’s value after Reuters reported that internal emails showed it had supplied inflammable cladding panels, knowing they would be used on the tower and despite warning in its brochures that only non-combustible panels should be used on tall buildings. Foreigners have tried to sue U.S. corporations in U.S. courts over alleged wrongdoing outside of the US (because of the higher awards and the possibility of punitive damages.)

However, US judges have consistently ruled that adequate forums exist in the plaintiff’s own country. (SOURCE: Liability claims for London tower fire may be limited: Analysis, Thomson Reuters)

Burning buildings quickly translate into human tragedy, but who is responsible for the safety of those in the buildings, and adjoining buildings? Certainly employers, landlords, tenants and property owners/landlords  and managers. The common areas and safety systems, such as fire alarms, smoke detection, sprinkler systems and fire equipment of properties should be the responsibility of the property owner/landlord and property manager.

Some types of buildings are more susceptible to fire risk, such as:

– high rise buildings – due to the difficulty to evacuate 
– buildings with a high number of occupants and visitors, malls and hotels. 
– older buildings where the fire protection systems have not been maintained;

So how does a Broadform liability policy respond to coverage for liability for spread of fire?

Strangely enough the policy wording may not even mention spread of fire. This is because the operative clause covers legal liability and the public liability section; third party claims arising from property damage and bodily injury. As spread of fire is not specifically excluded, it’s included (that’s insurance for you!) So unless the policy schedule sub- limits the indemnity limit on the spread of fire or sets out a different deductible, the limit applicable to the spread of fire liability will be the same as the main public liability limit and the deductible will be the same as well. It is up to the underwriter to specify if he or she wants a lower indemnity limit or higher deductible to apply and to ensure that this is clear from the policy and the schedule.

Insurance protection is also provided for a tenant’s liability for damage by fire to the rented premises the tenant occupies; this cover is usually provided as an exception (or carve back) to policy exclusions applicable to property in the insured’s care, custody, or control.

A good brokers will ensure that the liability limit takes into account worst case scenarios and is high enough to cater for the indemnity and the legal costs of defending the insured particularly where there is a fire and the consequences of claims arising can be as devastating as the fire itself.