Production Exposure and Key Equipment

The plant production equipment at our client's plastic-product manufacturing facility was well-protected. However, aluminum dies used in the thermoforming machines were stored in racks in an area of the plant not protected by automatic sprinklers. Although there were many dies stored in this area, 25 were considered critical, as they accounted for 67 percent of the plant's production capacity.

During a visit by one of Affiliated FM's account engineers, it was determined that a fire in or near this storage area would expose the dies to high temperatures in excess of 1000 F (538 C), quickly rendering them unusable. Although CAD drawings of the dies were available, plant personnel reported it would take at least four months to have several of the dies replaced. However, replacement of most of the dies would be longer due to the necessity of high-quality machining by pre-qualified vendors to achieve product consistency. Plant personnel could not determine the time frame needed to replace all the critical dies.

This exposure was brought to the attention of key management personnel. They agreed this presented a severe exposure to their business because customers could not wait for production to restart after an extended downtime. As a result, action was immediately taken to minimize the exposure. The dies at this facility were relocated to an area protected by automatic sprinklers and well away from other combustible material. In addition, a review of the location of die storage was undertaken across the company to ensure that similar exposures did not exist at their other facilities. Finally, a formalized corporate contingency plan was instituted, which included the offsite storage of spare dies for critical product lines.

The client was most appreciative of Affiliated FM's ability to help them recognize and minimize a critical exposure to their business.

1. Superior Underwriting and Loss Prevention Consulting

A company that manufactures heating and air-conditioning equipment for large commercial vehicles approached Affiliated FM for insurance. Our engineer visited the plant and found the existing ceiling sprinkler protection could not provide adequate fire protection for the raw and finished goods in rack storage. The engineer discussed this deficiency with management, and together determined this posed a very large risk of loss to their operation. The building's roof was constructed of wood, and a fire in the racks would likely destroy the entire building. Management also said they lost one of their key customers in the past because of the press coverage from a small fire, and didn't want it to happen again.

They went on to explain their current insurance carrier also identified the protection deficiency and recommended in-rack sprinklers, but they really didn't understand why they were needed and did not like the idea of in-rack sprinklers. Prior to binding coverage, we analyzed their existing sprinkler protection and determined they could achieve adequate fire protection for the rack storage by simply replacing their existing sprinkler heads with new technology sprinklers that
FM Global's research department helped develop. The new sprinklers would actually allow them to store product even higher in the racks, allowing them to make better use of the space.

They liked this solution and bound coverage with us—agreeing to replace the sprinklers because we had a better insurance policy. Coupled with the engineering, and even considering the US$20,000 to upgrade the sprinklers—our premium was still lower than our closest competitor.

We reviewed and accepted the sprinkler plans for this project, but it was rejected by the local fire service because they didn't have enough heat/smoke venting to meet the building code. They determined it would cost them US$100,000 to have additional vents and draft curtains installed to meet the building code. Our engineer met with the local fire service and presented our fire protection design standard for the new technology sprinklers that recommended against the use of smoke vents and draft curtains, as well as the fire testing data to support our position. They asked our fire protection engineer to draft a petition letter to request a variance from code regarding the draft curtains and smoke vents with the requirement that the links for the heat vents be replaced with higher temperature ones and the existing draft curtains be removed. We drafted a letter, they accepted the deviance, and it saved our client about US$80,000.

They remain business partners with us, and now the fire protection is adequate for their storage and their loss exposure is dramatically lower.

2. Partnering with Businesses to Reduce Their Seismic Exposure

The corporate headquarters for a finance company sustained major water damage from leaking fire protection sprinklers during the Nisqually earthquake in the Puget Sound area in February 2001. Following the loss, the company had problems with its insurance company on the claim, and their insurance broker was having difficulty finding property insurance for their next renewal.

After the broker approached Affiliated FM, an Affiliated FM engineer visited the building and determined the seismic risk would be acceptable with several seismic improvements. He evaluated the seismic bracing for the sprinkler piping in the building to help reduce the risk of future earthquake sprinkler leakage, and the company agreed to comply with any recommendations for improvement found during the visit. Affiliated FM bound coverage and is currently working with the company to reduce its seismic exposure.

3. Bakery Account

During a prospect visit by Affiliated FM to a bakery account's key location to evaluate the hazards and the risk, two main fire protection control valves controlling the automatic sprinkler systems were found completely shut. One valve controlled the fire protection system in the basement, which was located directly under production areas. The other controlled the overhead fire protection system in a section of the main building.

The valve was determined to have been shut for a year or more. The inspection tags on the risers indicated the systems were serviced in the past two months by the fire protection contractor and the shut valves were not noticed. The client was very concerned, and re-opened the valves to put the systems back in service.

After this discovery, the company became an Affiliated FM client. Some time later, there was a fire in one of their ovens. The intense fire opened more than 30 sprinkler heads, getting water to the seat of the fire. Because the fire protection system was operational, the water wetted surrounding combustible material and cooled down the structural members of the building until the local fire service extinguished the fire. Production was halted or partially interrupted for some weeks. However, if the fire protection valve had not been open, the impaired automatic fire protection would not have been able to control the fire.

Without the fire protection in service, the oven fire would have ignited adjacent combustible material that would have burned unchecked, and ultimately consumed the facility and collapse the building structure for a total loss of US$30 million. It would have taken about 18 months to rebuild the facility. Because many of the company's customers were large fast-food chains, they most likely would have permanently lost their market share and never re-opened for business.