Is Your Insurance Only a Sprinkling of Protection?

Coverage in an insurance policy: is it known and agreed upon by the insured at time of issuance?’

The premium due on a policy is known and agreed.

A more important question is whether the coverage in the policy is known and agreed?

The answer to that question is ‘not always’.

A case in point involves use of what is known as a ‘protective safeguards’ endorsement. This is form that insurers use when they want to be able to walk away from a loss when the client does not have ‘up and running’, prior to loss, specific safeguards such as automatic sprinkler systems.

We are involved in a case in which the broker proposed coverage to a client to include a protective safeguards endorsement, applicable to automatic sprinkler systems and fire losses at ALL of the client’s properties in the policy. Unfortunately only A FEW of the properties were sprinklered.  Moreover, both the client and broker were not aware that such a provision was in the policy until we pointed it out.

Would a loss have been covered if it occurred at one of the unsprinklered properties?  It would likely need to be sorted out between client, broker and insurer in a costly legal battle.

The only way you know your coverage is to read and understand the language.

— Bob Allaire, [email protected]

Mar 28, 2016