August 2018
Case Study 2 - Fire - Melbourne Commercial Boarding House - Sprinkler System - Additional Benefits
Case Study 2 - Fire - Melbourne Commercial Boarding House - Sprinkler System - Additional Benefits
Through 2017 we were involved in a matter involving a fire to a multi level commercial Boarding House.
In granting a Building Permit to enable rectification of the fire damage the Melbourne City Council included the requirement for a Fire Sprinkler system with a value approaching $100k.
No such requirement existed prior to the fire.
The Insured sought to recover the costs associated with that Sprinkler system under the Additional Benefits section of their policy.
The Insurer initially resisted that component of the claim on the basis that;
“The property did not include a sprinkler system at the date of the loss and so to remediate the physical and smoke damage caused by the fire did not result in the need to repair or replace a sprinkler system, since none existed.
The Additional Benefits given by the policy for compliance with local authority by-laws requires the benefit to arise in the very specific circumstances set out in the clause. The relevant by law must regulate the repair, rebuilding or demolition caused by the fire. This means the repairs impacted by the by-law must be part of [our emphasis added] the fire damage , namely the physical loss caused by the fire.
We have pointed out above that the repair of the damage caused by the fire does not require the incorporation of a sprinkler system. There was no damage to a sprinkler system.”
The additional costs of installing a Sprinkler system were necessitated by a by-law galvanized by the fire event – we accordingly considered that the Additional Benefit cover provided within the policy technically ought properly respond to such costs.
People in all walks of life ‘see things in their minds eye’ quite differently and Insurance is no different.
Something that assisted in our collectively progressing this specific matter was the issue of traffic management costs, which the Insurer had naturally and correctly accepted as part of the valid cost of repair.
It was conceded that no physical repairs were required to the road given it was undamaged by fire. Those costs accordingly did not form part of the fire damage with that ‘test’ accordingly acknowledged as flawed, in part at least.
That mental ‘shift’ given the road patently wasn’t damaged made the journey to the intention of cover provided by the Additional Benefits a little shorter – with the Insurer ultimately accepting the costs of the Sprinkler in full.