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All Australian businesses are required to conduct comprehensive fire risk assessments regularly to identify, assess and mitigate workplace fire risk exposures. Keeping business work areas, employees and interactions with the public safe and ensuring your premises are compliant with fire safety regulations is critical in facing the risk of fire incidents.

The responsibility for a business's fire safety lies with building owners and facility managers. Systems and equipment such as fire extinguishers, sprinklers and emergency warning systems need to be maintained in accordance with Australian Standard AS1851, Routine Service of Fire Protection Systems1, the regulatory safety standards that building owners are expected to meet.

Conducting regular fire risk assessments should form an integral component of a business's risk management framework. Doing this helps to identify and avoid loss events in the workplace and the potential of endangering employee health and safety and disrupting normal business operations.

What are the main consequences of workplace fire events for businesses?

Commercial business operators should have prioritised workplace and people safety processes in place and be aware of the key and common consequences of business fire events, including:

  1. Injuries and fatalities
    Workplace fires may cause significant injuries and fatalities to employees and customers, with burns and smoke inhalation being two of the more common injuries. Victims may require extensive medical treatment for long-term health impacts.
  2. False alarm prevention
    To avoid emergency service providers being called to false alarms when a smoke or fire detection device is incorrectly activated, it's important to ensure all fire apparatus is operating correctly. Fire extinguishers, smoke alarms, and sprinkler systems should be regularly checked as part of your fire risk assessment process.
  3. Property damage
    Fires can cause significant damage to property, including buildings, vehicles, and personal belongings. Damage can be particularly severe in the workplace due to loss of valuable equipment, inventory, and essential documents.
  4. Business interruption and lost productivity
    Forced closure of businesses while awaiting repair may result in loss of business hours, revenue, and potentially customers. Aside from the physical damage, psychological distress may lead to employee absence and compensation. Filing insurance claims and completing paperwork can involve further disruption. Extended times of downtime business interruption is common and has been lengthened in recent years with repair and recovery times much longer than people typically foresee.
  5. Public and employers' liability
    Business and/or premises owners may be liable for accidents and faulty (or inadequate) fire safety equipment that relates to workplace fire events. Legal action and high-value claims settlements can be costly, stressful and time consuming, and are generally avoidable.
  6. Increased insurance premiums
    A single fire incident can directly trigger a considerable hike in insurance premiums at subsequent renewal/s. These higher premiums can significantly impact the business's bottom line.
  7. Occupational health and safety issues
    Occupational health and safety issues can arise in the aftermath of workplace fires, which can release hazardous chemicals into the workplace environment, posing a serious risk to the health and safety of employees, and is a particular risk for those responsible for post fire event clear-up.

Regulatory fines and penalties

Commercial premises are required to undertake regular fire risk assessments. Not doing so could result in fines and legal proceedings. Stricter action for non-compliance may be taken if the business has already sustained a fire event.

Key lesson and guidance: A combination of the above outcomes can intensify the impact of a single fire incident on a business. The good news is that by implementing a structured and comprehensive fire risk management approach these consequences can generally be lessened or avoided and the claims loss severity reduced.

Common workplace fire hazards to take into consideration

Although each working environment is different there are a number of causes of workplace fires and common workplace fire hazards to watch out for. Business owners and operators are advised to schedule regular assessments of potential fire hazards and work on ways to eliminate or reduce the attendant risks.

Following are some of the most common hazards in the workplace that can cause fires.

Faulty electrical equipment

Faulty equipment is a principal cause of a high percentage of fire incidents so periodically checking equipment and an annual test by a qualified electrician are essential. Overloading power sockets is another common cause of electrical fires. Don't plug more than one appliance into a socket, and unplug electrical equipment when not in use.

Flammable and combustible materials

Improper storage of combustible materials such as cardboard, paper, paints, chemicals, and plastics can lead to workplace fires. Also, consider the spaces where these materials are stored, such as garages, hotels, kitchens, and workspaces where cooking equipment and appliances are used and ensure that any spills are cleaned up immediately.

Inadequate or inoperable fire safety equipment

Ensure your workplace has functional smoke detectors, fire alarms, fire extinguishers, and an evacuation plan. There should also be proper ventilation with equipment such as extraction fans or LEV (local exhaust ventilation) where there is a risk of dust in the air. A maintenance schedule should be followed to ensure repair works when needed.

Natural hazards

Bushfires can originate from both human activity and natural causes with lightning the predominant natural source, accounting for about half of all ignitions in Australia3. Including a focus on potential climate and weather-related risks can provide an additional layer of fire risk safety in your response plan.

How to reduce the business exposure to fire risk with a fire risk assessment framework

Fire risk assessments involve comprehensive reviews of key standard fire safety compliance and identification of potential improvements to fire safety management practices. Gallagher risk experts can support and advise on a business's fire risk assessment approach or help to establish one with you.

Fire risk assessments are legal documents that can be referred to in court and having professional guidance can reduce your risks and validate the adequacy of the framework your business is using. The legislation in each Australian state and territory has different requirements which can make managing fire safety compliance for national property portfolios a complex undertaking4.

Using a certified company to complete fire risk assessments can identify issues that could be missed and provide clear guidance and recommendations to improve your fire safety management framework.

Insurance is an essential component in every business's ability to manage and face fire threats. For risk management and advice, and ensuring your property insurance is adequate and up to date, talk to one of our business insurance specialists.

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Sources

1 Australian Standard AS1851: Maintenance Of Fire Protection Systems, Australian Fire Control, 2 May 2022

2 2019-20 Australian bushfire season, Wikipedia, accessed 5 October 2023

3 Bushfire, Australian Government Geoscience Australia, accessed 5 October 2023

4 Australian Fire Regulations, FCF, accessed 5 October 2023

Disclaimer

Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient's industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers' control.

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