Avoid a chemical reaction: commercial insurance considerations you can’t ignore

Bertus Visser, Chief Executive of Distribution at PSG Insure

Bertus Visser, Chief Executive of Distribution at PSG Insure

AUTHOR: Bertus Visser, Chief Executive of Distribution, PSG Insure

If you work with chemicals, you understand the associated risks. But are you aware of your insurer’s requirements to keep your business covered?

We have seen several instances of insurers repudiating fire-related claims when chemicals are kept on site. There are several considerations you need to take into account, from specifications for the working premises to correct storage solutions. You must also always meet legislative compliance requirements.

First things first: full disclosure

Legislation is the starting point for determining compliance requirements. Insurers can apply relevant laws when assessing claims, so it’s important to understand those that impact your business. Next, it’s important to disclose all relevant business information and discuss applicable laws with your adviser. With your adviser’s assistance, you must also disclose all chemicals you use to your insurer, as this will determine the pre-loss value and inventory of your business. Reporting inadequate information could be costly, with far-reaching practical and financial implications.

Get your paperwork in order

Claims could be rejected if licences, permits and compliance documentation is missing or out of date. It is essential to keep updated documents that prove compliance with relevant legislation, regulation and by-laws. You must also be able to demonstrate that fire safety checks have been done.

Make sure your grounds are suitable

Another reason for repudiation can be that the building where chemicals are held is not equipped to do so. Various aspects come into play here, including the occupancy classification of the building (for example, whether it was designed to accommodate low- or high-risk tenants, with a high-risk classification indicating that chemicals can be on site). How the building is constructed, its ventilation, electrical installations and fire equipment factor in as well. You must provide fire protection suitable to the types of chemicals use, such as specific wetting agents, foam and powder fire extinguishers. There must also be early fire detection and automatic suppression systems in place. Finally, depending on the chemicals you use, it may be a prerequisite to display the type and quantities on the exterior of your business premises.

Store securely

If your designated areas for storing chemicals are found to serve another purpose (for example, storing motor vehicles or petrol-drive forklifts), your insurer can repudiate a claim, as there are specific storage parameters. For example, there are stacking compliance considerations that specify prescribed stacking heights. If you exceed these heights, the building must have an automatic sprinkler system. You also need to be cognisant of rules around chemicals kept against the walls and in the corners of the building. Fires in these areas are exponentially more intense than fires in the middle of the floor, so you must take special precautions.

Spills, no thrills

There are specifications for loading chemicals, such as predominately using diesel-operated forklifts (in many cases this is compulsory) and certified and competent forklift drivers. You also need to plan for spillages on site by keeping professional spill response experts on retainer for emergencies, including for any road transportation of chemicals.

Safe and savvy

Safety signs must be visible and you must provide emergency wash basins and decontamination showers for staff. Staff and visitors must also be given suitable personal protective clothing. Loading bays must have sprinkler systems to negate the risk of a truck becoming a potential ignition source, while piping must be properly earthed. Additional essential safety measures include fire walls, separate storage and production areas, and making sure flammable air-vapour mixtures are extracted.

It is essential to make sure you are operating safely and in an appropriate setting. Remember, it is your responsibility to let your adviser know exactly what your insurance needs are by explaining your business thoroughly and making any updates as you go.

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