Parking garages — long considered benign risks by property insurers — are facing more scrutiny from underwriters and potential rate hikes as fire hazards increase with the growing use of electric cars and other modern vehicles.

Recent incidents, such as a fire in a parking garage at London Luton Airport last year that destroyed more than 1,400 cars, have drawn attention to the rising exposures insurers face when fires spread rapidly among multiple vehicles.

Despite safety advances in the operation of vehicles, modern cars contain more combustible materials such as plastics. Efforts to control fires in garages that contain charging stations and electric vehicles powered by lithium-ion batteries can also be more complex, experts say.

The combustible loading of vehicles has changed dramatically in recent years, said Christopher Wieczorek, senior vice president, senior engineering technical specialist, at FM Global in Johnston, Rhode Island. 

“There’s a lot more plastic used in vehicles, and it’s that higher plastic content that is driving this risk,” Mr. Wieczorek said.

Large-scale fires are affecting entire garage structures, even open field parking, and byproducts of fires such as smoke can migrate to adjacent buildings, said Bill Ingram, Dallas-based vice president of technical operations for Zurich North America’s resilience solutions division. 

Historically, property insurers asked few questions when underwriting parking structures, said Mike Prindle, Atlanta-
based senior vice president and head of complex property at CAC Specialty. “Now they’re asking questions,” he said.

If a commercial office building with an attached parking structure has charging stations, insurers will be concerned that there is a greater risk that a fire in the parking garage could spread to the building, Mr. Prindle said.

“If there is that exposure, they do rate for it. It’s a higher rate than it generally would have been,” he said.

Insurers might also reduce capacity.

 “It could affect their line size if it’s a shared and layered program. If it’s a single-carrier program, it might affect the amount of capacity that they can put out,” Mr. Prindle said.

The nature of parking garage fires has changed, said Kevin Madden, New York-based managing director, real estate practice leader, at Aon PLC.

In property inspections, underwriters look to see if garages have charging stations and where they are located, he said. Insurers are “only beginning to underwrite that exposure,” he said.

Subterranean or street-level parking where multifamily or commercial buildings are elevated above parking garages is being examined more closely by underwriters, particularly if there are charging stations, said Mike Bugielski, Los Angeles-based senior risk control consultant and area vice president at Arthur J. Gallagher & Co.

Some organizations limit electric vehicle parking either to ground-level floors, or in some instances to the exterior of properties, said Michael Rouse, New York-based U.S. property practice leader at Marsh LLC.

New residential developments sometimes “specifically put parking for electric vehicles, inclusive of charging stations, in the open air and not in a parking garage,” he said.

Lack of advanced safety equipment is also a concern, and some insurers have declined to write parking garages because they didn’t have sprinklers, said Tom Lentz, Chicago-
based chief technical officer and senior fire protection consultant at Aon. 

EV fires can last for hours and require more water to extinguish, Mr. Lentz said. “The amount of heat EVs generate when they go into thermal runaway is incredible,” he said.

The 2023 edition of the National Fire Protection Association 88A Standard for Parking Structures requires sprinklers in all parking structures, including open parking garages. As of January 2021, FM Global upgraded its hazard rating for parking structures from a category 2 to 3 because of the higher fuel load content in vehicles, Mr. Wieczorek said. 

Stephen Penwright, San Francisco-based large property technical director for Zurich North America, said the insurer has started to track parking garage fire losses globally.

Lack of sprinklers in parking garages and the spread of fire from vehicle to vehicle are key factors in the severity of these losses, Mr. Penwright said. Many of these issues arise where parking garages are attached to casinos and hospitals, he said.

Historically, those risks were considered soft occupancies, because they were permanently occupied, he said. Now, underwriters are more wary of fires potentially spreading to the building, which accounts for most of the value of the location, driving underwriters to take less participation in the risk, he said. 

If garages don’t have sprinklers and the risk quality deteriorates, “rates would go up,” but policyholders can adjust deductibles or sub-limit locations to try and mitigate the potential rate increase, he said.

Risks should be tested, said Kevin Bates, group head of risk and insurance for Australian construction company Lendlease Corp. in Sydney (see related story below).

Parking structures that contain EVs and charging stations may increase fire hazards in tightly packed spaces that lack ventilation, and introduce new risks, he said.

“It’s a very different risk to a concrete area where people come in and park,” Mr. Bates said. 

Sprinklers, inspections help mitigate hazards  

Parking garage operators and owners should take proactive measures to reduce fire risks including pre-planning and walk-throughs with local fire departments, deploying early detection devices and upgrading sprinkler systems. 

Charging stations should be located by garage entrances or where they can be easily accessed by fire departments, said Kevin Madden, New York-based managing director, real estate practice leader, at Aon PLC.

“If they’re outside, put them at the other end of the parking lot. Don’t put them right next to the front doors” of office or residential buildings, he said.

Ensuring that upgraded sprinkler systems are installed in parking structures is critical, said Jeffrey John, San Diego-based account engineer, property & casualty, at Woodruff Sawyer & Co.

“Upgraded sprinkler systems won’t (necessarily) put out the fire, but they’ll cool down the adjacent vehicles, preventing the fire from spreading,” he said.

Thermal sensors and other devices are available that can detect abnormal temperature readings, and these can be installed near charging stations and where vehicles are parked, he said.

EVs and charging stations should be separated from other areas and equipment regularly inspected, tested and maintained, said Bill Ingram, Dallas-based vice president of technical operations for Zurich Resilience Solutions, a unit of Zurich North America. 

If third-party companies install charging stations, contracts should be reviewed to check repair and maintenance schedules and location details, said Mike Bugielski, Los Angeles-based senior risk control consultant and area vice president at Arthur J. Gallagher & Co.