When a fire destroyed a food manufacturer's combined head office and production facility, the first problem was immediately visible: reinstatement costs exceeded the building's sum insured. The second problem took longer to surface. A liability issue involving third-party equipment on hire that was damaged in the blaze triggered cover under care, custody and control provisions - a section of the policy the business may not have considered relevant until the claim arrived. The total claim reached an $11 million reserve, according to a case study published by insurance broker Gallagher.
The fire started when heat from welding work ignited the site's pasteurising area. All manufacturing halted immediately, threatening the company's supply contracts and revenue. Reinstatement costs exceeded the building's sum insured, and the claim spanned multiple policy sections, requiring coordination between the insurer, loss adjusters, a mortgagee and reconstruction contractors.
The claims strategy centred on staged progress payments rather than waiting for a final settlement. Gallagher said this approach funded relocation, alternative production arrangements and rebuilding works while the business continued trading from a temporary site - a sequence that allowed the company to maintain customer contracts through a recovery period that might otherwise have forced a market exit. The business ultimately rebuilt its facility, retained its supply relationships and remained operational throughout.
The care, custody and control provision is worth noting specifically. It is a section of commercial and industrial property policies that often goes unexamined until a claim makes it relevant. Where third-party equipment is regularly on site - hired plant, equipment under finance arrangements, or machinery belonging to contractors - confirming that the policy responds to damage to that equipment is a review step that should happen before a loss, not after.
The gap between reinstatement cost and sum insured in this case is not unusual. Vero's 2025 SME Insurance Index, which surveyed 1,750 Australian businesses, found only 42% review their sum insured annually, and almost 10% reported being currently underinsured. More than one-third had experienced a claim where the sum insured was insufficient to cover the loss.
Rebuild costs have continued to climb. Crawford Australia has identified underinsurance as a compounding risk as construction costs move higher, while Master Builders Australia told members in an April 2026 webinar that cost bases established during supply chain crises do not return to prior levels once those conditions ease. For brokers reviewing commercial and industrial clients, a sum insured figure set two or three years ago - before the sustained construction cost increases that followed the supply chain disruptions of the early 2020s - is increasingly likely to be materially below current reinstatement value.
Claims involving major property damage are also taking longer to resolve. Crawford has noted that claims inflation in Australia is becoming more persistent, with tight repair capacity and rising duration costs creating pressure points across complex commercial claims. Duration blowouts are most likely in claims requiring complex repairs, tight sequencing, or constrained specialist capacity - exactly the conditions a major industrial fire produces.
Gallagher's case study points to four practical actions that apply across any commercial property book.
Review sums insured regularly - at every renewal at minimum, and more frequently for properties where rebuild costs, building standards, or asset values have changed materially. A sum insured conversation is more productive before a fire than during one.
Ensure business interruption cover reflects realistic recovery timeframes - a food manufacturer rebuilding a specialist production facility in a tight construction market may face a recovery period well beyond a standard indemnity period. BI cover that runs out before trading resumes leaves the gap uninsured.
Maintain up-to-date asset records - including third-party equipment regularly on site. Care, custody and control provisions depend on the insured knowing what is on the premises and whether the policy responds to damage to it.
Engage claims support early when a complex or large loss occurs - staged progress payments are a claims strategy, not a default outcome. They require active negotiation and coordination across multiple parties. The earlier a broker or claims specialist is involved, the more options remain open.
