Owning a hotel or motel can be a great income generator, but it also comes with a variety of structural fire risks. It takes only a few seconds for your entire investment to go up in flames, thanks to fire sources ranging from faulty wiring to a single lit cigarette—and your insurer may not provide the extent of coverage you will need to get back on your feet. Attorney Bill Voss explains common causes and problems of these kinds of fires, and how a commercial fire claim is only as strong as the owner’s insurance policy.
Common Causes of Motel and Hotel Structural Fires
While we may think of guests as being the primary reason that fires start in hotels or motels, many fires actually start for other reasons. According to a 2015 report by the National Fire Protection Association (NFPA), the leading causes of structural fires in hotels and motels include:
- Cooking equipment. Nearly half of all fires originate in the kitchen. These fires account for 8 percent of direct property damage and over 25 percent of civilian (non-firefighter) injuries.
- Heating equipment. Nine percent of fires originated in the building’s heating equipment, causing 16 percent of overall property damage annually.
- Clothes dryers or washers. Laundry equipment caused 8 percent of fires, but 12 percent of civilian injuries—a relatively high rate.
- Smoking. While cigarettes, pipes, matches, lighters, and other smoking materials only accounted for 8 percent of fires in the hospitality trade, these fires caused 75 percent of civilian deaths.
- Electrical and lighting equipment. Although only 5 percent of fires were caused by electrical equipment, hotel wiring and lighting problems were responsible for over 25 percent of direct property damage losses.
Hotels Cause Unique Insurance and Repair Problems for Owners
There are many things owners must do after a fire on commercial property in order to protect their patrons, their businesses, and their right to full and fair insurance payments. The actions a hospitality owner takes right after damage occurs are often costly, but they are invaluable when it comes to collecting insurance. For example, insurance coverage may be impacted due to:
- Damage prevention. Insurers often require policyholders to mitigate the effects of damage done to their properties. While the extent of a business owner’s responsibilities may vary, the owner should take reasonable steps to prevent any additional damage to the insured property. Actions may include closing off damaged areas, installing beams to prevent structural collapse, making temporary repairs, and using fans or pumps to dry out the building after the fire has been extinguished.
- Closing for repairs. Hospitality executives are often faced with the hard decision of whether to keep some rooms open or close the entire location after a fire. Keeping a portion of the hotel or motel operational can generate much-needed income for repairs, but it also poses safety hazards to the guests. In addition, insurers may assume that the damage was not extensive if the doors remain open after the fire. Owners who have paid for business interruption coverage enjoy the best of both worlds, as they can recoup payments for lost bookings while their doors are closed. Some policies even offer contingent business interruption, which can provide additional coverage for relocating guests who were staying at the time of the fire.
- Building code upgrades. When a hotel is repaired, it cannot simply be put back the way it was. It will have to be rebuilt according to current building and safety codes, and must pass inspections from state and federal regulators. Depending on the upgrades to the building’s structure, plumbing, or wiring, the additional changes can range in the thousands of dollars. These changes will have to be made throughout the property, not just to the areas that were damaged, and getting insurance payments to cover the upgrades can be difficult.
- Franchise requirements. Many hotels and resort properties are operated by franchisees. Operators of chain hotels are required to adhere to all franchising rules and regulations of their licensing agreements. Unfortunately, insurance companies may only be liable for the costs of repair for direct physical damages, and deny payments for the costs of bringing the hotel up to the chain’s operational standards.
In order to avoid any unpleasant surprises, it is recommended that hotel or resort owners review their insurance policies several times per year to fully understand the terms and limitations of their coverage. If your commercial enterprise was ravaged by fire and your commercial property insurance claim was denied, we can help. Fill out the form on this page today to contact the Voss Law Firm, P.C., about how to dispute an insurance denial.