Explosion can be defined as sudden and rapid combustion, causing violent expansion of the air, gases or vapours (Dämpfe) accompanied by a report (meaning a loud noise in this context). With respect to property insurance the substances that matter are those that cause the explosion. Thus explosions due to explosive substances and dust are insurable, but not those caused by the tearing of rotating solid bodies due to centrifugal force or the bursting of containers and pipes due to the high internal pressure of fluids or gases. Property insurance does not, therefore, cover explosions in boilers and pressure plants, which are insured as a separate class of risk in the engineering department.
Insurance is needed not only to cover the property directly affected by the explosion, but also other property owned by the policyholder which may have suffered consequential damage. Business interruption pays for loss of earnings and, if available, contingent business interruption for the financial consequences of explosions at the plants of suppliers or customers. Public liability insurance covers bodily injury and property damage to third parties due to explosion, in Germany trade associations (Berufsgenossenschaften) providing indemnification if those injured are the policyholder‘s employees.
Companies involved in activities that use explosive materials, such as manufacturers of ammunition and fireworks, are obviously dangerous risks, as well as those using natural gas and petroleum in the production of chemicals. However, potentially dangerous are environments in which dry powder or dust is finely dispersed in a confined space if this is exposed to heat, and oxygen and fuel are also available. This sort of situation can occur in many types of plant, such as sawmills, grain silos and in facilities that do any type of high-speed grinding and blending of fine powders. Moreover, in attempting to extinguish a blaze (Brand) firemen can unwittingly cause an explosion by dispersing dust into the air that had settled on the ground and other surfaces.
In industrial settings underwriters must understand the degree of risk in the industrial processes involved and policyholders should comply with legal regulations and follow the advice of various professional organizations. The Verein Deutscher Ingenieure (VDI), for example, lays down risk management standards for the prevention of explosion in environments that are exposed to powder and dust.
For private customers…