Data centers are not only inherently at high risk of sudden fires, but they are also likely to suffer extensive damage as a result. Hundreds of servers running 24 hours a day can generate extreme amounts of heat, and if the cooling systems fail, millions of dollars may be lost in a few moments. Attorney Bill Voss explores how data center owners can reduce their fire risks and how to select the insurance options that will cover the full extent of fire losses.
Fire Insurance Coverage and Risk Reduction for Data Center Owners
The best way to minimize fire losses is by installing adequate fire alarm and suppression systems, stalling fire damage before it has a chance to spread. Due to the amount of water-sensitive electronics and cables, data centers may need to invest in inert gas suppression systems that deprive a fire of oxygen, or clean agent systems that put out the fire by removing the heat from the room. These systems may be more expensive than standard sprinklers, but their ability to extinguish fires without leaving moisture or chemical residue on equipment often makes them worth the investment.
When it comes to purchasing fire insurance for a data facility, IT business owners should read the following provisions of their policies extremely carefully:
- Tangible property losses. A property damage policy will likely cover your inventory and equipment (such as servers, cages, hard drives, and cables), as well as the damage to the structure itself. However, it may not pay for the loss of electronically recorded or stored information, such as data, software programs, and other media. Owners may need to purchase a policy endorsement—or an entirely separate policy—to pay for data retrieval and recovery and the loss of virtual information.
- Utility interruption. A data center that relies on municipal power may suffer network interruption due to a fire on the premises or offsite, while a loss of power can also prevent fire suppression systems from deploying. Owners should consider purchasing comprehensive fire coverage for each facility that pays for losses regardless of how the fire occurred.
- Extra equipment coverage. Many components in a data center can be extremely expensive to replace, including air conditioning and cooling systems, generators, and surveillance and security measures. A higher coverage bracket can cover these additional expenses, and may even pay for the cost of renting servers in an offsite location until inventory is restored.
- Water damage. Fire departments may fight the blaze with hoses, unaware that water can cause even more harm to your servers and equipment than the fire itself. Owners should ensure that their policies cover fire damages as well as any damage caused in fighting the fire, such as flooding, power losses, and short circuits caused by water.
- Business interruption. Every minute of downtime can cost owners of a data center hundreds of thousands of dollars, and income may be slow during the time it takes to rebuild. Business interruption insurance, also called business income protection, replaces lost profits for up to six months—which may be extended in some cases if repairs are still not complete.
- Total loss coverage. Regardless of which provider you choose for your fire insurance, it is vital that you will be fully compensated if the fire results in a large loss. Total loss insurance should be enough to pay off the mortgage on the building, satisfy outstanding debts, and settle contracts with your customers without relying on additional funds from your personal holdings.
If you are having trouble getting your insurance company to cover the costs of a fire, we can examine your policy and fight on your behalf to get you the full amount you are owed. Simply fill out the form on this page today to contact the Voss Law Firm or order a free copy of our book, Commercial Property Owners Must Read This BEFORE Filing an Insurance Claim.