Sparking debate

Between 1999 and 2003, 41 fire claims costing more than £100,000 each were caused by hot work, according to the Fire Protection Association. The total cost of these claims was nearly £23m, with each fire costing on average more than £500,000.

However, for once the story may be bigger than the headlines suggest. These figures do not include more numerous and less serious fires costing less than £100,000 or fires where it was difficult to prove hot works was the cause due to the extent of the damage. The real impact of hot work fires could be far greater than the industry realises.

Blow lamps, metal cutting and welding - particularly in roof spaces - are the most common cause of hot work fires but the risk should be minimal if it is managed properly. Heritage buildings including schools and cathedrals are particularly vulnerable, as they were not designed with modern-day fire prevention measures in mind and are often tinder-dry due to their age.

Most commercial insurance policies include automatic cover for contract works, although insureds should continue to notify their insurer of any work taking place. The hot work permit system requires contractors and property owners to be aware of the risks and take precautions to minimise the possibility of a fire. For example, finishing work an hour or two before leaving the premises and 'damping down'.

As useful and common sense as the permit system is, the real problem - and the source of greatest concern and frustration for property insurers - is the contract system set up to cover building works.

Larger building works usually involve a contract issued by the Joint Contracts Tribunal. JCT contracts are agreements to insure the worked-on building under joint names - employers (property owners) and contractors. This protects contractors' interest in the project; for major works they will be investing a great deal of time and money.

Insurance payout

JCT contracts add contractors to the insurance cover, so if a fire occurs during the building works, a property owner's insurance will pay out regardless of who caused it, even if the contractors are negligent. Sub-contractors brought in to complete parts of the work are not always covered by these contracts and often their insurance, if they have any, will not cover them either.

JCT contracts place an insurance policy in joint names - property insurers, therefore, cannot seek recovery for negligence as that would mean suing themselves. Recovery from small sub-contractors is often not possible or practical and in most cases the resulting legal costs and likely recovery will not justify the time, effort and expense.

In the case of the widely publicised fire at the National Trust's Uppark House, insurers were able to recover from negligent sub-contractors. This is, however, an exception rather than the norm. At present, property insurers are left to face hot work claims alone and are powerless to redirect the blame and cost at the real culprits.

In the case of commercial properties, such as factories and warehouses, hot work fires can cause serious disruption to business, so business interruption is a significant part of any claim. However, listed and heritage properties such as schools and churches face more serious consequences, as they are historically important and, if damaged, their value will be lost forever. Re-build costs and business interruption claims are also likely to be higher due to the specialist nature of the work required and their reliance on tourism.

So what can be done? Insurers cannot decline fire cover or exclude hot work, as this is a fundamental part of insurance cover. Education appears to be the sharpest tool at property insurers' disposal.

Apply for permit

Property owners need to be aware of the risks hot work poses and use the permit system religiously. A claim might not impact them financially but it will drastically affect the running of their business and a serious fire can have a lasting effect on a business beyond the initial aftermath. For heritage properties no amount of money or time can restore them to their original state, and visitor interest will be diminished.

Contractors also need to realise the gravity of their responsibility. A lack of action will inevitably result in rising property premiums in the future, so it is in everyone's interest to be concerned. The building industry could introduce formal and accredited hot work training, allowing property owners to exercise a degree of quality control when choosing a builder. Insurers could also impose excesses for fires caused by hot work.

Whatever the solution, the problem needs to be taken seriously. Until then, negligent contractors and their insurers will continue to avoid the direct financial repercussions of hot work fires and property owners, their insurers, and society will continue to pay the price.

HOT WORK CLAIMS