Zurich helps customer identify a risk it didn’t know it had

Turning up the heat on risk: Recently, during the winter months, a Zurich construction customer was in the process of building several assisted-living centers across the Midwest. Senior Risk Engineer Tom Flannagan was assigned to the onsite visits.

With deep knowledge and experience in construction management, Tom understands the challenges of winter heating – the techniques and tools used to shield workers from inclement weather. Often, construction companies use open-flame propane heaters to provide warmth and plastic sheeting that envelops the structure to keep wind and cold temperatures at bay. Although these are effective pieces of equipment, together they also can create a potential safety hazard.

“Zurich identified an exposure related to the use of ordinary plastic sheeting as opposed to the use of fire-rated plastic sheeting through risk assessments when underwriting coverage for wood-framed structures,” Tom explained. “Risk Engineering consistently identified the fire exposure associated with the lower-cost sheeting.”

Although the exposure is also present in steel and concrete framing, wood structures are more flammable and exponentially more dangerous, Tom explained.

The price difference between ordinary and fire-rated sheeting is substantial, Tom added: Fire-rated sheeting costs about 60 percent more. However, the extra cost is not necessarily the reason some builders don’t use it. Some companies, he explained, aren’t even aware that a fire-resistant material exists. That was the case with the construction customer involved in this story.

“Most contractors do not have a standard for the use of plastic sheeting as a winter heat component,” Tom said.

Outlining the cold, hard facts: Zurich laid out the potential risks to the customer. “Our engineers identified the exposure in risk improvement reports, as well as in conference calls with the company’s risk manager,” Tom said.

Any fire event involving the plastic sheeting would have involved a builders risk claim, which in this case was insured by a company other than Zurich. Tom and his risk engineering colleagues took action to make the customer aware of the potential hazard — particularly since such a fire could lead to greater danger.

Flying ember from large wood-frame fires can cause adjacent buildings to catch fire, which could result in a general liability claim, Tom pointed out, adding that such a scenario caused the 2002 Santana Row fire in San Jose, Calif.¹ In that instance, the initial embers floated downwind to ignite the rooftops of buildings a half-mile away and developed into an 11-alarm fire.

Warming up to risk mitigation: Tom’s insights helped compel the customer to invest in the safer sheeting, and not only for that particular building project.

“The insured now encourages their site supervisors to require the fire-rated alternative to reduce exposure to loss,” Tom said. “A change in policy resulting from a site-visit observation is not common among construction insureds. They saw value in our observation and made the adjustment.”

Tom acknowledges that it’s hard to assign a dollar value to this type of business win.

“It’s difficult to predict the value of an event that was avoided, but a builders risk claim could be as high as the value of the work, and additional losses may arise from delay damages for failure to deliver the project on time or damage to the insured’s reputation in the market,” he said. “Potential losses also include  general liability claims for fire to adjacent buildings or injured workers.”

“This effort demonstrates Zurich’s greater breadth of service, knowledge and experience,” Tom added. “Zurich’s Risk Engineers can provide service beyond the traditional health, safety and environmental exposures.”

¹ U.S. Department of Homeland Security. “Santana Row Development Fire. San Jose, Calif.” U.S. Fire Administration/Technical Support Series. Aug. 2002.