Although commercial contractors are usually aware of the dangers of fires at jobsites, that doesn’t mean they are prepared for one. For many, a big part of the problem is putting too much faith in their builder’s risk insurance policy without understanding the minutiae. For others an “it won’t happen to me” attitude is the culprit. Whatever the case, inadequate fire preparedness can lead to significant delays and exponential cost increases when the worst happens. When it comes to preparing for fire risk, having the right insurance is only the beginning of what’s important.
Given a lack of functional fire protection systems, new construction and renovation projects are more susceptible to fires. Builder’s risk insurance provides vital protection during this vulnerable time; however, builders commonly make errors and oversights that cost them when putting together policies and fulfilling reporting requirements. For instance, builders who fail to properly report the actual percent complete in their evaluation could be underinsured if peril strikes.
Contractors should also consider all direct and indirect costs when establishing the completed project value for the builder’s risk policy limits. In addition, replacement costs can change so it’s important to work with an insurance broker or risk manager to ensure that replacement cost and not actual cash value is used when establishing the insurance company’s reimbursement obligation for a covered loss. After the 2018 wildfires in California, for example, replacement costs for damaged structures skyrocketed due to a shortage of skilled construction workers, an increase in labor and material costs, and plan review and inspection delays.
In fact, many builders experienced these common pitfalls with recent wildfires. One builder had an exposed roof with no viable fire protection systems and no way to protect it. The builder knew that if an ember alighted on the roof it would ignite. Moreover, after reviewing its builders risk policy, the builder realized it was underinsured; the contractor had failed to include temporary structures, scaffolding, construction forms and other equipment and materials stored onsite in the policy. A fire would have spelled total disaster, so as part of a last-ditch effort to save the project the builder added fireproofing to the roof. That story has a happy ending, but many builders are not as fortunate. Ultimately, this type of situation can be avoided by working with an insurance broker and risk manager to design a comprehensive builder’s risk program.
Fire-related hazards are everywhere on the typical construction site. In addition to equipment that can spark fires, combustibles are commonly found in storage areas. According to the National Fire Protection Association, the U.S. averaged more than 3,800 construction site fires per year between 2011 and 2015. The leading causes of fires in structures under construction include:
The one thing many construction fires have in common is human error. And on a construction site, human error can take all kinds of forms, from unenforced non-smoking policies to misusing equipment. For example, during a renovation, one builder was having issues with condensation on top of a large commercial freezer. To remedy the condition, the builder placed a large fan on top of the freezer to enhance the evaporation process. After months of continued use the fan caused a fire. The problem wasn’t just that the fan wasn’t rated for such intensive use, but it was also out of sight and out of mind and effectively unmonitored.
Beyond the common causes of fire highlighted above, in California and many other parts of the country, builders can’t ignore the potential of wildfires. According to the Insurance Information Institute, the U.S. saw more than 100,000 wildfires in just the two-year period of 2017 and 2018.
Wildfires can be particularly devastating to builders, depending on the circumstances in the area. With wildfires, builders often have to completely start over in areas where building costs suddenly rise due to labor shortages. The combination of higher costs and extended loans can spell business disaster for many construction organizations.
When it comes to preparing effectively for fires, construction organizations need to pay attention to a variety of key details. The first step is developing a comprehensive fire safety plan that is actually site specific. In today’s fast-paced construction environment, it’s become all too easy to copy and paste plans instead of considering the unique risks and considerations for each jobsite. A customized plan is especially critical in wildfire areas. It’s a good idea to include diagrams in the fire safety plan that show existing buildings, proposed construction contractor laydown and fences, fire access routes, driveways, and any fire hydrant and firefighting equipment locations.
Having a plan is only the beginning. The next challenge is executing the plan day in and day out. On an average jobsite that means regularly reviewing fire procedures and even holding drills. Crews should clearly understand the procedures, how to protect the area and what should be done from a fire prevention standpoint before people leave the site every day. In a wildfire area, it means having a fire watch and being mindful about clearing combustible debris as well as drying shrubs or vegetation and ensuring trees are separated by at least 10 feet and far enough away from the jobsite. The laydown area for materials should also be away from the building. As previously mentioned, designing a comprehensive builder’s risk program with oversight from an insurance broker and risk manager is an absolute must.
Any commercial builder that has ever been through a fire is also keenly aware of the importance of having a plan for a quick recovery should a fire occur. The reality is that even though builders have their own crews, they are often not equipped to properly dry out the building and deal with soot and smoke damage. Specialty equipment and materials, in addition to properly trained restoration personnel, are essential for fully recovering from fire damage. It’s not uncommon for unqualified contractors performing fire restoration to ineffectively deal with odor issues, for example. And if restoration is not performed using best practices insurers may deny the cost associated with these efforts. That’s why it’s worth developing a relationship with a qualified restoration provider prior to an incident. Ideally, builders should have a vetted disaster recovery contractor under contract who is aware of the builder’s jobsites and is standing by in case of an emergency. In wildfire areas this is especially important because in large catastrophic situations restoration providers will focus on their regular customers first. New clients might be last on the list for getting drying equipment and restoration support.
Builders in northern California are now hyper aware of fire risks. Many are asking “what would happen if there was another fire and how should I prepare?” because the lives of their businesses depend on it. But in any construction organization, time is money and anything that can be done to reduce the chance of a fire and recover quickly after a fire is worth a small upfront time investment.
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