Protective safeguard provisions can lead to denials of coverage. Condominium officers and boards, their insurance agents, and especially their property managers should be very wary when the requirement of protective safeguards are included in a policy or mentioned in an application. A failure to have protective safeguards in place and working may leave a significant condominium property loss completely uninsured.
Here is the typical clause regarding protective safeguards for fire, but these can apply to burglary alarms and just about anything an underwriter desires to reduce the risk of loss of an insured peril:
We will not pay for loss or damage caused by or resulting from fire if, prior to the fire, you:
1. Knew of any suspension or impairment in any protective safeguard listed in the Sche- dule above and failed to notify us of that fact; or
2. Failed to maintain any protective safeguard listed in the Schedule above, and over which you had control, in complete working order.
If part of an Automatic Sprinkler System is shut off due to breakage, leakage, freezing condi- tions or opening of sprinkler heads, notification to us will not be necessary if you can restore full protection within 48 hours.
A recent New York case ruling that no coverage was afforded to a fire loss1 shows how these requirements can result in no insurance benefits for an otherwise covered loss:
The property insurance policy issued to defendant by plaintiff Illinois Union Insurance Company contained a protective safeguards endorsement (PSE) that unambiguously required as a condition of insurance that defendant maintain automatic sprinkler systems in complete working order in all buildings in its multi- building condominium complex. The investigation into the fire that spread through the complex causing extensive damage determined, inter alia, that some of the buildings did not have sprinkler systems and others had only limited sprinkler systems and not all of them were working properly.
…Both the Aspen and the Illinois Union policies contained the requirement of fully functional sprinkler systems in all buildings in defendant’s complex.
The New York and New Jersey Merlin Law Group attorneys pictured above fight insurers with these protective safeguard issues on a regular basis. But, the best course of action is to avoid the problems altogether by avoiding these endorsements or making certain they are always compiled with.