Key risks when storing dangerous goods and flammable liquids
- If a business is storing dangerous goods or flammable liquids, it’s important to manage and store them correctly
- Dangerous goods can present risks – and mitigating those risks is key to ensuring insurance remains sustainable for customers and their insurers
- Getting it wrong can lead to major loss events that compromise safety, business assets and operations.
Flammable liquids and dangerous goods are commonplace within many commercial and industrial businesses. And if those goods aren’t stored and managed correctly, they can create a significant security and safety risk.
But what classes something as dangerous goods, and what should businesses be doing to minimise the risks they face?
Types of dangerous goods found in commercial and industrial businesses
There are nine different classes of dangerous goods, with subdivisions falling within those categories.
The nine classes are:
- Explosives (products that can alight or detonate during a chemical reaction)
- Gases (compressed gases in liquified form, refrigerated gases, mixtures of gases and other vapours and gases charged with gases or aerosols)
- Flammable liquids (a liquid, or mixture of liquids, or liquids containing solids, that require a much lower temperature to ignite)
- Flammable solids or substances (products that are easily combustible and likely to contribute to a fire)
- Oxidising substances and organic peroxides (extremely reactive products that react readily with other flammable materials)
- Toxic and infectious substances (including poisons and biohazards)
- Radioactive materials (pose significant danger to health and the environment)
- Corrosive substances (as above)
- Miscellaneous dangerous substances and articles (substances that present a danger but aren’t covered above).
One of the most common classes of dangerous goods found in commercial and industrial businesses is flammable liquids, including ethanol (70%), petrol, paint thinner and automotive diesel.
“Dangerous goods pose a risk to more than just health,” says David Middleton, Team Leader – Risk Engineering at QBE. “They can also pose a risk to property and the environment.”
The exact measures and procedures needed will differ depending on the type and volume of dangerous good stored, and the starting point is knowing exactly what you’re storing.
“You need to be fully appreciative of what you do have on site, what it is and how much you've got, because without that information, you're not going to be able to store it correctly,” says Middleton.
Getting it wrong can lead to major loss events that compromise safety, business assets and operations.
“When dangerous goods are involved in an incident like a building fire, there's a severe lack of control and predictability to the blaze – and this reduces the ability for the fire brigade or any other service to effectively fight and suppress the fire,” says Middleton.
“So there is significant potential for a large loss in situations where dangerous goods are involved – particularly if they aren’t stored correctly.”
Mitigating common risks associated with storing dangerous goods in commercial and industrial facilities
While knowing what you’re storing, and in what quantities, is the first step for any business, there are a few factors that should be considered.
These include:
- Ventilation: Does the area have the right amount of natural or mechanical ventilation for the volumes and goods stored?
- Spill control and containment: Are the right measures in place to contain any escaped materials in the event of an incident?
- Inception hazards: Are any potential sources of fires or other incidents minimised or removed? For example, hot work areas.
- Incompatibilities and separation: Some dangerous goods create adverse reactions when mixed, so it’s important to store any goods like these in a manner so they don’t react with each other in case of an incident.
- Training: Has the right training been provided to employees on their awareness of dangerous goods?
- Signage and handling: Ensure handling procedures are in place and correct placards and signposting are visible.
- Registers and manifest requirements: If needed, are these in place?
“In terms of creating a safe environment to store dangerous goods, there’s no catch-all regarding what you should do to ensure safety, as risks vary so much depending on what’s being stored and the quantities they’re being stored in,” explains Middleton.
“Once you know exactly what you’re storing, the next step is to consult with a dangerous good specialist, who can advise you on exactly what you need to do to comply with standards and reduce risks.”
What underwriters look for when assessing a risk
From an insurance perspective, underwriters will look at a number of factors to assess the risk a business faces, to help manage those risks and keep premiums sustainable for all parties involved.
One of the key aspects is an up-to-date survey. Will Bales, Senior Property Underwriter at QBE, says, “Different surveyors will provide different levels of information, and some risks may contain amounts of dangerous goods that require more than just the information and commentary of a typical survey.
“In those instances, we’ll require specific documentation around the types of goods stored, the quantities, how they are stored, and risk management around these. If there are significant quantities, we may need a dangerous goods specialist’s report with other supporting documentation as well.”
Of course, no mitigation measure will be perfect, so an important part of the underwriter’s role is to understand the attitude to risk and what the business is willing to do, to improve that risk.
If a survey is impossible or impractical – perhaps due to time or multiple locations – providing the underwriter with as much risk management information as possible, including storage and segregation processes, policies and procedures, is even more important.
“As an underwriter, we don’t want to be guessing, that could lead us to be overly conservative in our stance to pricing, deductibles and capacity – or without this information, we may not be able to insure the risk at all,” says Bales.
Hazardous substances or dangerous goods?
There’s sometimes a bit of uncertainty about the difference between dangerous goods and hazardous substances; however, the two are quite distinct.
Hazardous substances can be solids, liquids or gases, and are classified as hazardous based only on immediate or long-term health effects.
Dangerous goods, meanwhile, are an object, substance or material classified based on immediate physical or chemical effects, such as fire, explosion, corrosion or poisoning.
