The West Quay shopping centre in Southampton was closed after a truck exploded outside its car park, causing heat and smoke damage.
According to the BBC, Hampshire and Isle of Wight Fire and Rescue Service confirmed the fire was accidental, “possibly caused by a gas canister.”
Fires are the third most feared risk of business interruption.
According to Allianz’s Risk Barometer, “fire is the third top cause of business interruption companies fear most (43% of respondents, ranking behind only cyber incidents [49%] and natural catastrophes [49%]).”
While incidents of this nature are rare, retail establishments are particularly vulnerable.
The Fire Industry Association reports that retail businesses “face the highest frequency of incidents, accounting for 15% of all major fires, often leading to substantial inventory losses.”
Andrew Wood, divisional director of global & corporate risks at Howden Group, stresses the importance of brokers in helping businesses manage business interruption risks.
Wood highlights how brokers can help clients assess risks and offer tailored cover options: “A good insurance broker will help a client consider their risk exposure and offer them extra cover options that meet the needs of their business.”
For Wood, brokers should recommend standard property and business interruption coverage, with denial of access as an optional add-on: “A standard property and business interruption policy will cover such an event. It is normal that cover for denial of access is included. Purchasing the cover is optional, and the client can choose what level of cover to purchase and can choose the policy deductible to apply.”
Wood also notes that a Civil Authority extension can be considered if local authorities block access to the business, though it’s circumstantial: “A Civil Authority extension is like a denial of access extension but will respond if access to the insured premises is not physically prevented but instead restricted by a competent local authority that cordons off the vicinity surrounding the loss site. Like a denial of access extension, there will be a sub-limit, physical radius limit, and there may be a waiting period.”
Following an unexpected incident like the truck explosion, Wood emphasises several types of coverage brokers should recommend. Property insurance is the first step: “The owners of buildings, plant, contents, or stock physically damaged by the fire and explosion can claim against their own property insurance policies for the fire and explosion damage, assuming they purchase property insurance which is not compulsory.”
This is often paired with business interruption insurance: “Any commercial entities that purchase property insurance are likely to purchase business interruption extensions to their policies.”
If a business is impacted without direct damage, contingent business interruption insurance may be needed. Wood explained: “This cover is available if the premises are within the ‘vicinity’ (typically one mile) and often includes a waiting period before claims can be made.”
Wood also recommends considering subrogation rights to recover losses from the responsible party: “The insurers of property and business interruption policies will assume the rights of the insured to subrogate against the party legally responsible…”
Wood explains that brokers should also be mindful of other risk events that can impact businesses: “Other risk events that can impact businesses in city centres are more challenging. Rioting and demonstrations, terrorist attacks, bomb threats, unexploded Second World War ordnance are all examples of risk events that may or may not cause physical damage on or near insured premises but can nevertheless cause interruption or interference to an insured business.”
For such risks, brokers should consider additional coverage options based on the business profile. Wood stated: “Examples of additional cover would be cover for terrorism, event cancellation, non-damage denial of access, and continued loss of attraction to the area. How appropriate these covers are will depend on the type of business and its location in the country.”
