“This is a huge issue, both in personal real estate and commercial,” said Randy Amyuni, director of risk management for Grand Rapids-based insurance company The Campbell Group. “What has happened is that urban areas generally have better fire, ambulance and police protection, response times are quicker, and have fully staffed fire departments as opposed to volunteer fire departments.”
The other issue, he noted, is the availability of water. The city of Grand Rapids provides water as far south as 100th Street, but development, particularly industrial, does not stop there. Without water infrastructure, fire departments are severely limited in their ability to extinguish a fire. Its availability is one of the primary factors the Insurance Service Office uses to determine a municipality’s Public Protection Classification.
Outlying areas of the region’s most popular industrial zones — including Walker and Alpine, Cascade and Gaines townships — have ISO ratings of Class 9 or above, denoting an almost assured total loss if a facility relies on local authorities alone. By contrast, Grand Rapids is an ISO Class 3.
“Typically in manufacturing, urban sprawl is just unbelievable, and the townships are looking at how they are going to require businesses to be protected,” Amyuni said. “They’re trying to steer companies toward areas that have the infrastructure in place. That’s part of how townships are marketing themselves.”
Still, many companies choose to locate in unprotected areas, particularly those that require vast amounts of acreage or have traditionally located in rural areas.
Randy Phelps, a vice president for Universal Insurance Services Inc. in Grand Rapids, works with several such companies. Food processing clients, for instance, provide a worst-case scenario for insurers. They are generally located in framed, pole-barn-like buildings in the middle of nowhere, and have a large amount of value onsite and an equally large amount of combustible material.
In such a case, an insurance company will determine how much capacity it will put toward the property, then seek reinsurance. “The more reinsurance you have to buy, the more the premium is going to be,” Phelps said.
In certain cases, companies can expect to pay double or more in premiums than what a similar company would under different circumstances, Phelps said, but many times it is more a function of internal policies than municipal readiness.
A company with large amounts of hazardous or combustible material can improve its insurance picture with strong housekeeping procedures. One additional measure would be to store combustibles in a separate building at least 50 feet away, only bringing out a day’s supply at a time.
The strongest solutions, Phelps said, are found in the building itself. Frame construction is obviously a greater risk than steel span or concrete. And if the local government can’t provide water, the company should be prepared to.
“Sprinklers are always the best way to go,” said Pat Knight of Knight Risk Management Services, a fire protection safety consultant who works with insurance companies such as The Campbell Group. While sprinklers are not always required in facilities, Knight said, they are still the strongest protection. If water availability is an issue, companies can invest in water towers or retention ponds.
A sprinkler system is generally $1.25 to $1.50 a square foot, usually equal to about 2 percent of the cost of the building, according to Doug Irvine, president of Brigade Fire Protection in Belmont.
“It’s not something huge, but when you get into a holding tank and fire pumps, you’re actually talking about quite a bit more,” Irvine said.
Depending on the application, the additional investment can easily reach six figures. The pump alone can cost upward of $50,000.
For large manufacturers, many of these options become necessary even in protected areas.
Knight has worked with some of the region’s largest manufacturers, including Steelcase Inc. At these facilities, water tanks and other upgrades are needed to protect the company’s investment in the facility.
For many manufacturers, Knight said, the same policies apply regardless of where they are located. Companies should invite fire officials into facilities for emergency planning and to help develop safety procedures. If a fire does occur, he contends, it should never be the first time a firefighter enters the building. This applies even for areas served by volunteer fire departments.