Investment in tools like fire detection and suppression systems, not only catch fires early in the process, but protects the insurance companies from the risk of an employee getting unnecessarily injured while fighting a fire. Insurance companies want to work with clients that take an organization-wide approach to mitigating their fire risk across all of their facilities and protecting their biggest assets.
By Ryan Fogelman, John Schumacher and Jim Emerson
After countless meetings and discussions with waste and recycling facility operators since we first launched the company, the question of insurance approvals and discounts inevitably comes up at some point during the due diligence process. Although one would expect the answer to be an unequivocal “yes, with an associated percentage discount”, there are a number of factors that come into play when an insurance company is evaluating their perceived risk for providing coverage for your operations. One thing I have found to be crystal clear: engaging your insurance provider early in the process of assessing and developing a fire protection strategy puts you in the best place for understanding which investments, training and tactics make the most sense for your operation. This is especially true if you have multiple facilities with multiple types of risks.
In this article we will not only focus on the fire risk which our clients’ operations face on a daily basis, but we will also look at the range of issues facing your facilities, the role that insurance plays in our industry and specific tactics an owner/operator can implement in order to lower each sites’ risk profile. I have been fortunate to collaborate with both John Schumacher (recycling insurance broker) and Jim Emerson (insurance carrier loss control) in an effort to provide our readers with a unique insight and perspective to not only find the cause of fires, but also the solutions that insurance companies look for when evaluating the risk of loss of any operation.
Scope of The Fire Risks
If you own or are part of an organization that operates in the waste and recycling industry, it is no secret that the risk of fire is prevalent in your operations. Even the best operators are not able to completely eliminate their risk of fire. In the past 12 months, we have seen 377 reported fires in waste and recycling facilities across the U.S. and Canada. To be clear, these are publicly reported fires only. Based on reasonable assumptions which I have outlined in a number of my other articles, it is likely that the industry is facing more than 1,800+ fire incidents annually, which translates into 40 percent of waste and recycling facilities experiencing a fire incident within the past 12 months (see Figure 1).
The causes of these fires range from traditional material hazards such as propane tanks, fertilizers, hot work activities, hazmat, smoking and chemicals to new hazards such as electronics and lithium-ion batteries. In addition, we have seen other factors contributing to the increase in fires including, but not limited to, climate change related heat/dryness and China’s recycling restrictions. Regardless of the cause, the industry has seen a 77 percent year over year increase in fire incidents in the first six months of 2018 alone (see Figure 2,). This has a number of industry insiders concerned that the rash of fires due to lithium-ion batteries alone is a scary prospect that must be addressed. These types of fires have increased in most of the major material recycling verticals (see Figure 3,).
Although it might seem like a small number when compared to other materials, the 43 percent year over year increase of waste fires is highly significant since it makes up almost 40 percent of historical totals. In addition, metal fires have more than doubled YTD compared to the same period in 2017. Metal fires traditionally make up about 30 percent of historical fire incidences. From an insurance perspective, they are seeing the number of incidents increase along with the subsequent payouts. Based on their increase of risk, waste and recycling companies need to be more proactive than ever if they want to mitigate their fire risk and put their best foot forward in the eyes of their insurers.
The Insurance Process
Insurance is considered the last line of defense (whereas fire prevention and fire suppression are 1st and 2nd). If the insurance policy is paying out a fire loss claim, there have been failures in prevention and suppression efforts. Property insurance coverage is one of the more complex lines of coverage and requires some basic understanding by the owner/operator who is purchasing it. Business owners typically request that their brokers provide them with the least expensive insurance options. In many cases, lower premiums provide more limited coverage. We have all played the balancing act of evaluating “too much coverage” versus “properly protected.” It is important that the owner/operator and insurance broker discuss what level of insurance coverage is desired. Some key points that owner/operators need to take into consideration when evaluating insurance options are:
• Deductibles—Most insurance policies have deductibles. Business owners that are willing to accept higher deductibles can achieve premium reductions while maintaining fundamental coverage of the items that are desired in the event of a loss.
• Co-insurance—Not insuring property to the right value can create a risk. The loss payout could be subject to a co-insurance penalty, reducing the amount the owner receives to rebuild the assets of the business. The safest bet is for co-insurance to be waived and an agreed value noted on the policy. This typically carries a slightly higher rate/premium, but is a good cost to value expenditure.
• Business Income—Business income provides payment to businesses that are not able to operate because of a property loss. This can be an essential coverage that allows a business to survive in the event of a property loss. The business owner must decide if this is an important coverage item based on their ability to earn revenue if their loss prevents operation at the location. A business income worksheet is often completed to determine the proper limits of coverage that are needed. Do not skip this step. Estimating limits without completing this step can often lead to underinsured losses, which can lead to business failure.
• Ordinance and Law—This coverage provides additional claim dollars for building code upgrades that are required by the local jurisdiction in the event of a rebuild or significant remodel of a property. Lower cost property insurance policies often exclude this coverage, which can cost well into six figures and should be considered an essential coverage item.
Lowering Your Site’s Risk Profile
Every insurance company has different ways of assessing risk. They look at both the risk of the industry as a whole as well as your company’s specific risk. From an industry perspective, there is not much an insured can do to change the insurance company’s view of the industry’s risk, but there are several ways to increase the insurance company’s faith in the risk mitigation of your operations which can lead to more favorable premiums. Based on the company’s track record, we have seen companies over the years that are deemed “uninsurable” based on the number of incidents versus companies with a strong track record that are able to leverage their reputation with more favorable premiums from the insurance companies.
As we all know, there is not an end all, be all solution that is 100 percent effective at fighting every potentially fire/explosion risk. This is why we recommend a combinational approach to reduce the risk of fires in a bulk recycling and/or trash tipping floor, pit, baler, equipment and storage operation. A combinational approach uses the best pieces, people, equipment, communications and training in order to provide your operations with the best chance of catching and eliminating a fire incident before it becomes a major fire incident and shuts down your business. For most waste and recycling operations, we typically recommend:
1. Thermal cameras—automatic thermal detection, often sensing dangerous temperature differentials before a fire even starts.
2. Use of a pre-wetting foam agent and possibly in combination with twin 1 – ½ inch (or 1-3/4) water nozzles as an option.
3. Remote, human verified, manual control of the foam agent dispenser from a safe location.
4. Configure the above for 180-degree area with the best line of site coverage available with the ability to operate for sweeping and pre-wetting around the fire perimeter and collateral assets.
5. Eliminate fire brigade as it puts valued employees at risk and is difficult to administer in compliance with OSHA requirements. (OSHA allows a limited fire brigade that can monitor evacuation and address incipient stage fires as long as they are not interior structural fires.)
6. Configure an emergency response such as providing a lancing nozzle, fire service hose and a deck gun in order to be prepared for the fire professionals arrival.
7. Ensure that a pathway is maintained for the fire professionals to safely enter the facility where the fire department has been trained to arrive.
8. Train employees to start the fire pump and shut off the proper electric circuits to save time for the fire response professionals.
9. Have a trained bulldozer/loader operator with the proper equipment or make sure the fire department is trained on your equipment.
10. Have a working automatic sprinkler system and adequate water supply. The water supply may be lacking at some locations, so having a tank system and early detection solution is highly recommended.
11. Have a solid “human training” program. This means regular inspections and testing of fire equipment of all types, being ready for a fire event with a simple but effective fire emergency response plan and good housekeeping, contractor and hot work controls are essential.
12. Have manually operable roof vents to let heat escape. Heat is likely to get out through roll up doors, melt light panels on exterior walls, etc. but if you can have the ability to relieve it by opening roof vents, it is much better and safer since the fire service will not have to manually cut a vent in the top of the roof.
13. Have secondary rally points in a safe place, potentially even offsite, for personnel that can remain and help the fire service (e.g., in effecting safe plant shutdown, operating crane, etc.). They may wish to have personnel leave the site either immediately or shortly due to smoke and the need to assure personnel safety. Having a place you can rally and stay in communication (with plans, electrical/gas schematics, radios, etc.) offsite can be very instrumental.
14. Develop a rapport with the fire department, which includes training with TEEX/NFPA on how to fight a fire in a recycling and trash tipping floor/pit operation.
Using the tactics listed above can have the following benefits:
- Earliest detection with fire detection technology and application of pre-wetting foam can eliminate fires, contact the proper response and greatly reduce or eliminate major fire incidents.
- Adding additional foam CAFS systems allow more manual applications of foam from a safe distance for employees.
- Installing a deck gun and setting it up for the fire department’s arrival will save valuable time on arrival. This process takes a lot longer than what we see in the movies and allows the fire department to get right to work.
- If you can only provide one form of sprinkler head, protect the structural steel columns in combination with an early detection and suppression system.
- Roof vents can be opened. Let the fire department do this as they want to be able to control this important aspect. Being able to do this with a button versus mounting the roof manually and cutting with a saw protects emergency responders from a potentially dangerous situation.
- This approach allows the threat to structural steel elements to be greatly reduced. This is the main inflection point in firefighting. At this point, the fire department can become the most effective on the interior attack towards the seat of the fire.
Remember, doing the previously mentioned combination of items will optimize the fire service outcome or possibly result in immediate incipient fire extinguishment when caught early enough. These capabilities together as a combination will reduce your facilities fire risk profile and provide your best chance of getting the best insurance coverage and rates.
A Solid Plan of Attack
Mitigating your facility’s risk in the eyes of an insurance company is a complex process that takes commitment and a strategy that goes well past checking the box an insurance application and receiving a discount. An insurance company wants to be confident that the owner/operators are committed to not only making sure that there is a proper fire safety infrastructure in place, but they also want to see a solid plan of attack if and when an unfortunate incident occurs.
Investment in a combinational approach to firefighting, which includes tools like the fire detection and suppression systems, not only catch fires early in the process, but, most importantly, they also protect the insurance companies from the risk of an employee getting unnecessarily injured while fighting a fire. Insurance companies want to work with clients that take an organization-wide approach to mitigating their fire risk across all of their facilities and protecting their biggest assets (and potentially largest risk and payouts for the insurers) protected with a solution that allows them to sleep at night. Just as the owner/operators are in the business of waste removal and recycling, the insurers are in the business of keeping their payouts low. These are two achievable goals with the right approach to risk mitigation industry-wide.
Ryan Fogelman, JD/MBA, is VP of Strategic Partnerships for Fire Rover (Southfield, MI). Ryan is focused on bringing innovative safety solutions to market. Ryan has been compiling and publishing the “The Reported Waste & Recycling Facility Fire in the US/CAN” since February 2016 and speaks regularly on the topic of scope of the fire problem facing the waste and recycling industry, detection solutions and onsite proactive suppression solutions. He can be reached at (614) 327-3744 or e-mail [email protected].
John Schumacher has 25+ years’ experience as a Safety Professional and Insurance Broker and focuses on insurance and risk management solutions for the waste and recycling industry. John has a bachelor’s degree in Occupational Safety and has earned designations of Certified Safety Professional (CSP) and Commercial Lines Coverage Specialist (CLCS). He can be reached at (847) 463-7224 or e-mail [email protected].
Jim Emerson, is an Engineering Manager for Starr Tech, a division of Starr Indemnity based in NY, which specializes in insuring commercial industrial risks. His experiences include property protection engineering roles for several additional carriers including technical, managerial and consulting leadership roles. He can be reached at [email protected].