A business suffered a significant fire, with damage to both its building and business equipment and property. After examining the loss circumstances, no coverage was provided, even though not one, not two, but three different insurers had separate policies in force.

All three policies had a provision regarding a sprinkler system and the insurers discovered that, when the fire took place, the system did not work. Since the problem was known by the insured well before the loss took place, coverage was denied.

Please click here for more details, including the court’s view on whether the insurer’s denial decision was justified.

This court case is a useful, maybe even a painful, reminder that insurance policies are contracts. They include contractual obligations. Parties to the contract sometimes act as if they were the same as social obligations. That can end poorly.

When insurers and insureds reach an agreement regarding coverage and premium, it often depends upon rating and underwriting considerations. Specifically, premium credits are often provided when the chances of loss are mitigated, such as the existence of a sprinkler system. Of course, everything is rendered moot if the mitigation doesn’t take place. Unlike merely a social faux pas, missed contractual obligations result in hard consequences.

The insurers took action when the insured failed to meet the responsibility of maintaining a system that could have affected the fire loss.

Click here to see a description of a relevant commercial property policy endorsement. The excerpt is from PF&M Commercial Property Available Endorsements and Their Uses found in Advantage Plus.

We want to share some information that, increasingly, appears to be treated as a secret. Contracts, agreements are excellent tools for getting a wide variety of objectives accomplished. It often seems a more popular take in that agreements can only have a single winner. It may explain behaviors that exist only within the logic of one party attempting to gain something at the other party’s expense.

Look, agreements typically allow both parties to win. In the matter of insurance. one party has the expertise and resources to help businesses survive losses that could be crippling. The other party has committed to operations that contribute to the local or even up to the national or international economy. Their purchase of insurance makes them contributors to the overall pool of funds that assist other businesses. In order for insurance to work with the minimal amount of friction, all parties must embrace their duties and obligations.

Click here to review an article that discusses the protective safeguard endorsement in more detail. It is from Emarketing for Agents Available found in Advantage Plus.

A critical takeaway from the situation at the heart of the court case we shared above is, the promise and protection of a legitimate insurance contract was wasted. The results? The effort and expense of several insurers in procuring a policyholder was nullified. Insurers grow and thrive by finding customers that fit the risk profiles they seek. Then, to turn them into long-term partners. The result for the policyholder? It’s possible that they may have suffered a business setback or, worse, may have lost their business when the situation was completely avoidable.

Sometimes offering coverage and delivering a policy may not be enough, at least with regard to long term objectives. Think how the above incident could have turned out so much differently if some extra effort had occurred. An inspection may have discovered and corrected the maintenance problem before a loss occurred. Perhaps more client education would have helped the business recognize the importance of complying with the conditions of their policy. Serving clients more completely can create multiple winners.

Click here for an article with insights you may wish to consider. It discusses the worth of broadening your or your agency’s service offerings to help clients better understand risks. It is from the 02 21 issue of Rough Notes Magazine that is found in Advantage Plus