Fire Loss & Resultant Business Interruption

A fire originating in a self-storage facility spread rapidly to neighbouring properties, including two warehouse style retail stores. We were appointed to deal with claims on behalf of a national retail business who we act for, under a retained Service Agreement.

What We Did

We promptly attended the site to establish the extent of damage, and it quickly became clear that the buildings and everything inside were damaged beyond restoration. In liaison with the client’s property and finance teams, we collated information required to prepare claim details in terms of internal fit-out and stock.  The buildings were owned and insured separately, and concerns were raised at an early stage as to whether the premises would be reinstated; the site presenting a redevelopment opportunity for the freeholders. We secured settlement of the client’s fit-out, contents and stock claims at an early stage, leaving only the business interruption as an ongoing loss.

The client quickly implemented loss mitigation measures by diverting customers to other nearby outlets. However, beyond that, options for alternative trading were limited. We monitored the ongoing sales impact by tracking transferred customer sales at other stores operated by the client in the surrounding area. The net loss of sales and gross margin were calculated and interim payments secured periodically.

Meanwhile there was no sign of progress with the landlord’s building reinstatement after many months, frustrating the client’s efforts to resume trading at the fire damaged location.

The Outcome

As it became clear that the building would not be reinstated within the maximum indemnity period on the business interruption policy, we prepared final claim calculations with a view to negotiating the final settlement.  The continuing sales losses had shown consistency for many months after the initial loss mitigation measures, hence Insurers accepted that a settlement in advance of the end of the MIP was a viable option in this case. The overall settlement secured exceeded £1.6m. Whilst the client was pleased with the settlement, they experienced the same frustration many leasehold tenants face, being heavily reliant on their landlord and/or building insurers in terms of full recovery from a major fire.