Companies fear ruin if forced to pay for fire

Fujairah Free Zone Authority holds tenants responsible for lack of insurance, but firms claim policy providers refuse coverage.

Workers demolish the roof of a building that was damaged by the fire int he Fujairah Free Zone.

Fujairah // Companies affected by a fire which destroyed a large warehouse in the Fujairah Free Zone three weeks ago have been told they are responsible for paying for the damage. The 740-square-metre warehouse was reduced to mostly rubble and ash by the Dec 5 blaze, halting operations at nine businesses renting space in the building. Officials estimate the damage to the building and company inventory and machinery could total Dh100 million (US$27m).

Some businesses fear they would be ruined if forced to pay for the damage. "If we have to pay for this fire, what we're looking at is bankruptcy," said one businessman, who spoke on the condition of anonymity. "We're scared to death here." He and employees of other companies said it should be the responsibility of the Fujairah Free Zone to pay for the destroyed building, since it owned the property and was responsible for setting safety standards.

Companies should insure their employees, inventory and machinery, but not property they rent, the businessman said. "If we were working overseas and we were renting property, the landlord would use our rent payments to pay for the insurance himself." But Sharief al Awadhi, the director general of the free zone, said all companies were legally obligated to obtain insurance on space they rented, and that the stipulation was clearly stated in their contracts.

"The contract says that they are obligated to have insurance on their activities, their people and the building," Mr al Awadhi said. "Everybody will pay and be responsible and liable for their actions and commitments." He said the free zone had gone out of its way to assist the affected companies by trying to provide them new workspaces at no cost. The Fujairah Free Zone Authority and Fujairah Civil Defence investigated the cause of the fire, but results have not been made public.

Mr al Awadhi said the free zone had attempted to insure the warehouse before it was rented but had experienced difficulties with insurance providers. "We insured the building before we handed it over to clients", he said, but the "insurance people said they would not honour the insurance". Some businesses said it was difficult to persuade insurance providers to cover the warehouse space they rented.

"If you don't own the property, how can you be expected to insure it?" said an employee of a company involved in Fujairah's shipping industry. "Normally, the owner of the property is the one who insures it. Insurance companies won't insure you if you don't own the building. At least they don't in this part of the world." After the fire, employees of companies that had not insured their rented space also complained of being prevented by authorities from entering the free zone.

Richard Berglund, the manager of OE Marine Services, a business that makes oil dispersants, operated for two years in the free zone without insuring the space he rented. He said his seven employees were not allowed in by guards, despite his business not being directly affected by the fire. "I understand that according to free zone regulations, tenants are supposed to insure their buildings," Mr Bergland said. But before the fire, "there was no issue over insurance, and no one brought this fact up to us".

"We have been trying to get our place insured for a year and a half, but we haven't been able to get it. The few providers that did initially express interest just didn't get back to us." Free zone authorities could not be reached for further comment. [e-mail]