The importance in fire claims of involving companies for the recovery and decontamination of machinery and plant

In fire claims, some assets are destroyed and, inevitably, must be replaced.  Others, on the other hand, only sustain partial damage and can be recovered.  Indeed, what tends to happen in serious incidents is that the fire directly affects some areas of the risk whilst other parts of the plant only undergo damage due to smoke, heat, the water sprayed by the Fire Brigade or by the risk’s own automatic extinguishing systems, or the corrosive gases that are formed such as HCI (Hydrochloric Acid), etc.

In these cases where the damage is only partial, it is both expedient and cost-effective to involve companies specialising in cleaning, drying, decontamination and recovery of the equipment, whether mechanical, electrical or electronic.  These companies, some of which fortunately we have in Spain, for example BMS Technologies, Debeer- Belfor, Recover, etc., must intervene as soon as possible since the corrosion and oxidation processes worsen day by day. Therefore, the chances of success are far higher with an early intervention in the loss event.

Apart from minimising the Material Damage in the case of partial damage, the Consequential Losses can also often be reduced by the intervention of these firms.  In fact on some occasions damaged machinery can be temporarily repaired and can then continue to operate for a few months until new replacements are obtained, thereby minimising the Loss of Profits.

In most cases both the Insurance Company as well as the Insured are very satisfied with the involvement of these companies since they can resolve what could have posed a major problem for them, such as being unable to produce over several months until the replacement machinery arrives, which in the case of complex machinery could take some 12 or 18 months.

Moreover, at VANTEVO CLAIMS ADVISORS, besides using these companies in certain loss events, we also involve companies that are specialists in salvaging partially damaged stocks, since they perform a task based upon the classifying and cleaning of the partly affected stocks that can be highly cost-effective for Insurers.

When must a faulty machine be replaced?

Often we have had cases where apparently a machine has been left so damaged following a Fire or Machinery Breakdown event that it has to be replaced.  However, before taking that decision, the situation must be thoroughly examined since, although the Insured may be interested in having the damaged machine replaced with a new one, as you are well aware, if the repair is both technically and financially feasible, then the insurance policies will settle the cost of the repair not that of the replacement.

The Insured can easily get a report from the machinery manufacturer explaining that the repair is not feasible and that the damaged machine must be replaced. Obviously, the manufacturer is interested in selling machines and therefore normally has no problem with issuing this type of report, which generally is pretty brief and not very technical.   But if the machine is replaced, then we will be faced with a total loss, and the cost of the damage will be more than the actual value of the machine.  In such a case, most policies prescribe that the actual or real value of the machine ought to be indemnified, that is to say, taking into account depreciation for age, use and obsolescence.

On the other hand, if we are facing a partial loss, or in other words, the cost of the damage is less than the actual value of the machine, then in this case the policy will indemnify the cost of the repair without applying any depreciation whereby the Insured will not have to make any disbursement whatsoever.

Another scenario that might happen in this type of loss affecting machinery is that it can be repaired temporarily, with no guarantee, so that it might withstand a few months whilst awaiting the arrival of the new machine, which often has delivery times of several months.  This is expedient when the shutdown of the damaged machine will give rise to some significant Consequential Losses.

What can also be useful is to ask for a second opinion or a second report regarding the chances that the machine may be repaired when the manufacturer and the Insured propose its replacement. Likewise, companies specialising in the recovery of facilities and machinery should be contracted, as they can minimise the damage and get the machine working again, even if only temporarily until the new machine can be supplied.

This solution is highly valued by Insureds and Insurers alike, since it allows the Consequential Losses to be minimised by reducing the potential losses of sales and clients.

To summarise all the above, with Machinery Breakdown not only is it important to learn the cause of the loss event, in order for which a metallurgical analysis is often required, but also it is essential to ascertain the exact extent of the damage and confirm whether the machine can be repaired or if it needs to be replaced.

At VANTEVO CLAIMS ADVISORS we work with reputable laboratories and reliable workshops, which allows us to resolve these two questions:  the origin and cause of the breakdown and the extent of the damage, clearly and precisely, thus enabling us to reach agreement with all the parties involved in the claim.