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Are you aware of the fire hazards associated with building materials?

Whenever we insure any type of Property Insurance risks, we will ask you what type of building may have been built.

The reasons for this are obvious. For example, timber burns much easier than brick (which tends to crack around the mortar if hot enough). Age is also important because in more recent times there are tougher building codes, making the more modern home a more attractive risk. 

We also consider age because older homes may have more degraded electrical wiring and plumbing. Such conditions are more likely to cause damage in some way with much less of a trigger. Insurance Underwriters will naturally apply different premium rates to these risks.
However it is notable that some Insurance Underwriters choose not to cover any buildings older than 50 years old. Additionally, some will demand that an appropriate professional inspects the building’s wiring and plumbing before considering the risk further.
EPS Panels
In more recent times, it has been a requirement to declare how much Sandwich Panel (Extended Poly Styrene) may also be in a building.

This material is used in cold rooms and is called this because the foamy material used between two sheets of metal is extremely hazardous when it burns, and it burns very easily and creates a toxic gas that not even firefighters with breathing apparatus will go near.

 "... more than 10% of floor space taken up withthis material, you must declare to insurers ..."

If you are in the food industry you will know this product well as it is also very hygienic and has great insulation properties important in maintaining cool temperatures. However, if you have more than 10% of floor space taken up with this material, you must declare it to insurers.
Cladding materials

Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.

A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.

Purchase up to six products under one Business Insurance Package. 

Cladding materials
In the last ten years, the use of cladding materials has become widespread due both to the demand for high-rise buildings and to the product's multifaceted use for insulation, improved rigidity and cosmetic purposes. Many of our more recently refurbished high rise buildings have these panels fixed to the outside of the building giving it that fresh new look. Even some houses and blocks of flats are being freshened up with these panels. They look quite good!

 "... some types of cladding materials imported fromChina fail to comply with Australian standards ..."

 There is nothing wrong with this if using Australian standard compliant products that require these panels to have fire retardant qualities. However, in recent times, some types of cladding materials imported from China fail to comply with Australian standards and lack the fire-retardant qualities of compliant products. The China-Australia Free Trade Agreement (ChAFTA) could intensify this problem. The incentive has been to save on costs rather than focus on safety!
How do we know this is happening?
In November 2014 the Lacrosse Residential Apartment Building in Docklands, Melbourne caught fire, suffering extensive damage.

"... external cladding enabled the fireto race up to the 21st floor ..."

The fire was started by a cigarette on an eighth floor balcony. The building's combustible external cladding enabled the fire to race up to the 21st floor.

It was subsequently found that the cladding material was imported from China and was not tested to Australian standards.
So what will happen now?
In a nutshell, building professionals, owners, managers and their insurers need to be aware of these risks.

While the builder was happy to save money on cheaper imported materials, there is no saving to everyone else. As the defect in the materials is not readily apparent until, for example, a fire ignites, there may be limited or no chance to recover from the builders, developers and certifiers if they are long gone by the time such an event occurs.

 "... using defective materials is potentially serious ..."

This can only increase the risk to insurers which ultimately is reflected in the premium. The alternative is to audit the existing work but this also comes at a cost.

The consequences of using defective materials is potentially serious in terms of injury, fatality and rectification costs. Insurance Underwriters have to become aware of those potential hazards when considering whether to accept a risk or not.

 "... Currently Strata Insurers accept in good faith thatbuildings have been constructed safely ..."

Currently Strata Insurers accept in good faith that buildings have been constructed safely, but this may not always be the case. To manage this risk, insurers may consider requesting certified documents to show that the material being used is compliant. They may also require assessments of existing and newly constructed strata buildings to determine the extent of use of cladding or other materials which do not meet Australian Standards.

Body corporates, strata managers and owner organisations could engage technical experts to undertake inspections of their buildings to determine whether the cladding and other materials used are appropriate and conform to relevant standards.

Regulatory and compliance professionals including builders, surveyors, technical assessors and building compliance officers also need to be aware of these risks. If they are accused of failing to do so, their professional indemnity insurers will soon know with an increase in claims and ultimately their own premiums.

In conclusion
Prevention is better than the cure, and if you are in the situation of being unsure about the materials used in your building, then seek expert advice before it is too late.

 While Insurance may pay for a financial loss, there is still a cost attached to this involving the inconvenience and loss of time, but also increased premiums from claims when we should be driving these back the other way with good Risk Management.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

Robert Cooper, CPR Insurance Services, ABN 51 146 841 287, AFSL 238433

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