Solving one problem can create an insurance nightmare

This image is of a spray insulation but it is not the same material as the subject of this post.

I have been working this week with a broker, who has a client located in one of the colder regions of Australia, who arranged and paid to have an insulating foam applied to their iron (sheet metal clad) on steel (steel framed) building.

When the broker saw this during their renewal meeting he immediately advised the Insurer who has advised that they are not prepared to offer renewal.

The material used on this occasion is ICYNENE MD-R-200™ which is is a combustible product and is therefore, consumed by flame, but will not sustain flame upon removal of the flame source. The manufacturer claims it leaves a charred foam residue and it will not melt or drip.

The advertising material states: “ICYNENE MD-R-200™ is subject to all National/State and County (this suggests United States rather than Australian) building codes regarding fire prevention.”

It goes on to say: “requirements for Thermal Barrier and Ignition Barrier coverings must be met as per the applicable building code having jurisdiction.”

The decision by the Insurer has, of course, created a huge problem for the broker and the Insured. How to overcome the problem short of removing the material or installing a sprinkler system is beyond me. Even if they can find an alternative insurer the cost of insurance is likely to be more expensive.

The take-away from this is that before an Insured does any sort of renovation that is more than a replacement like for like, then they ought to discuss it with their insurance broker. An insurance broker is much more than just a seller of insurance, they are a trusted adviser on risk management.

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