KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and white list ken@kirschenbaumesq.com ******************************* Subscribers who decline to pay for inspection and other essential services August 19, 2019 ********************* Subscribers who decline to pay for inspection and other essential services ********************* Ken, We frequently tell prospects and customers that their insurance carrier has an expectation that their fire alarm, sprinkler and other systems be tested properly per codes. After all, they probably got a break on their insurance rates by claiming that these systems were installed and in working order. If something was to happen and there is a fire, the insurance carrier may not pay out the claim if there is concern that the system was in neglect or not maintained. We recently met with an office building that took the attitude that since they’ve never seen the AHJ and the likelihood of something happening is so small that they don’t think they need to have their building properly inspected. I responded that if your building burns down, your insurance carrier might be reluctant to pay to rebuild it and they might have issues with the claims that come from your tenants who sue for lost revenue, damages and so on. It just had me thinking, are there any cases that you are aware of where the insurance carrier rejected a claim due to lack of proper inspections, testing or maintenance to a fire or sprinkler system? Anything like that on the intrusion side of things? Tim M ********************* Response ********************* Just before opening your email I read an email from an attorney asking [on our attorney listserv forum] about a homeowner carrier disclaiming coverage after a year of investigation because the homeowner lied about having a dog with vicious propensities [yes, the dog bit someone]. Homeowners are asked by their insurance carrier what alarm systems they have. Commercial premises are required by law to have fire alarm systems and inspect those systems. It should be obvious that casualty insurers rely on representations by their insureds and systems designed to reduce loss, like fire alarms. If a claim is significant enough you can be assured that a carrier on the hook for the loss is going to make sure there is no basis to reject the claim. A material misrepresentation in a policy application is sufficient basis to reject a claim. But you do have to examine the representation. “Do you have a fire alarm installed?” Yes. Maybe the carrier doesn’t ask if it works, or if it’s inspected or monitored? If the carrier does ask those questions then the answer must be true when made, but what about afterwards, can the subscriber stop inspection and monitoring without losing its insurance? Depends how the policy reads and the representations the insured is required to make. I am not familiar with any cases where subscriber’s carriers have disclaimed coverage because fire alarm services have lapsed, but I would be surprised if there weren’t any such cases. So what should you do if your subscriber doesn’t want to pay for essential services? This could include paying for repair services to make the fire alarm operational, inspection services to comply with the law and monitoring services, also required by law in most jurisdictions. You are not your subscriber’s lawyer; insurance broker; risk manager; or anything else that requires you to coerce your subscriber to comply with fire alarm laws, the subscriber’s insurance policies and common sense. What you do need to do is cover your butt. It’s not enough that you don’t check off the Inspection box on the Fire All in One. You should specifically note in the contract, on a rider and in the Disclaimer Notice, that the subscriber declines inspection service. Same goes for any other service that you know should be provided but the subscriber doesn’t want to pay for. Then it’s all on the subscriber. You should also be mindful that you cannot provide a Certificate of Service that is not accurate. You can confirm that the subscriber has a fire alarm system installed by you, but add that you don’t inspect or monitor the system if that’s the case. ******************** To order up to date Standard Form Alarm / Security / Fire and related forms, click here:www.alarmcontracts.com ************************* CONCIERGE LAWYER SERVICE FOR THE ALARM INDUSTRY PROGRAM You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** NOTICE: You can always read our Articles on our website at ww.kirschenbaumesq.com/page/alarm-articles *********************** THE ALARM EXCHANGE
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Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
