Beware of this ‘trap’ in commercial insurance

Beware of this ‘trap’ in commercial insurance

Beware of this ‘trap’ in commercial insurance

Many commercial insurance policies contain what’s called a “protective safeguards endorsement.” This gives the property owner a break on its insurance premiums if the owner protects the property through a fire alarm, automatic sprinkler system, fire safety service contract, or other method of preventing harm.

Sounds like a good idea, right? It can be … but the trick is that these endorsements typically say that the owner must maintain the system in good working order at all times, or notify the insurance company right away if there’s a problem the owner can’t control. Otherwise, the insurance company won’t pay for any losses.

That means the owner must be extremely careful about maintaining its systems. Also, the owner must be extremely careful about not letting a tenant do anything to compromise the systems. If a 
tenant is allowed to make minor alterations without the owner’s approval, for instance, how will the owner know if the tenant does something that unintentionally affects a sprinkler system?

These endorsements can be a money-saver, but property owners need to think long and hard about the potential negative consequences.


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Actual resolution of legal issues depends upon many factors, including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking any action on matters covered by this article. Nothing herein should be construed to create or offer the existence of any attorney-client relationship.