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Your subscriber’s insurer may require your alarm services

August 17,  2021
Your subscriber’s insurer may require your alarm services
          Harvey’s Sweet Shop suffered two loses.  First a neighbors tree feel on the roof and then a month later thieves apparently entered through the roof and burglarized the place.  Harvey’s claimed damages of $190,000 for the building and $15,000 for the burglary.  Harvey’s carrier tendered $1750 for stolen tools and $5000 for water and wind damage.  Harvey sued its carrier.
          Turns out Harvey never paid for building coverage; so that takes care of the claim for the building damage.  Harvey’s insurance policy had a “condition precedent” to coverage for the theft coverage; a burglar alarm monitored by a central station or directly by police was required.  Harvey conceded that it had no burglar alarm but argued that an alarm would not have made a difference because the tree damage left the roof open and the building exposed. 
          “Louisiana law governed the interpretation of the insurance policy. Under Louisiana law, an insurance policy, like any other contract, is construed according to the general rules of contract interpretation set forth in the Louisiana Civil Code… Contracts are interpreted to determine “the common intent of the parties….“Words and phrases used in an insurance policy are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning.”… An insurance policy “should not be interpreted in an unreasonable or strained manner under the guise of contractual interpretation to enlarge or to restrict its provisions beyond what is reasonably contemplated by unambiguous terms or achieve an absurd conclusion.”… A court cannot exercise “inventive powers to create an ambiguity where none exists or the making of a new contract when the terms express with sufficient clearness the parties’ intent.”… Thus, clear and unambiguous policy wording that expresses the parties’ intent is enforced as written.” Harvey Sweet Shop and Seafood, v  Western World Insurance Company.  USDC, ED Louisiana.
          The Court dismissed the lawsuit on summary judgment, holding:
          “Here, Harvey Sweet Shop’s claims for the building damage and the theft are not covered under the policy. The policy clearly indicates that it covers “business personal property” only, but not the building.20 Indeed, Harvey Sweet Shop concedes this point in its response to Western World’s statement of uncontested facts.21 Thus, Western World is entitled to summary judgment dismissing Harvey Sweet Shop’s building damage claim and its associated bad faith claim.
          Moreover, the policy’s “burglary and robbery protective safeguards” endorsement clearly states that coverage for theft is conditioned upon Harvey Sweet Shop obtaining and maintaining a burglar alarm that is monitored by an outside central station or the police station, and that Western World will not pay for any theft if Harvey Sweet Shop knowingly failed to maintain the required burglar alarm.22 Harvey Sweet Shop does not dispute that it failed to abide by this condition, and instead argues that the alarm would have been pointless considering that the hole in the roof caused by the fallen tree was the entry point for the thieves. The Court need not resolve whether the burglar alarm would have been effective in stopping the theft at issue because the parties themselves agreed, as a matter of contract, that having such an alarm was a condition precedent to coverage under the policy, presumably for the protections it afforded.23 It is undisputed that Harvey Sweet Shop failed to meet the required coverage condition of having a monitored burglar alarm. Thus, Western World is entitled to summary judgment dismissing Harvey Sweet Shop’s theft-related claim and the associated bad faith claim.”

          The Standard Form Agreements require your subscribers to obtain the insurance they deem appropriate to insure against 100% of their possible losses.  The subscriber is required to name you as an additional insured.  In the above case there was no alarm system, and if there was, rest assured the alarm company would have been included in the law suit, at least for the burglary claim.
          Almost all of your subscribers carry insurance.  Many of those policies require alarm systems.  Some carriers offer discounted premiums to their insured for the alarm coverage, which is why you are asked to provide a Certificate of Service [a Standard Kirschenbaum Contract ™ form ] so your subscriber can prove to its carrier that it has alarm service.  But many of these subscribers may not realize that the insurance policy goes beyond recommending an alarm and offering a discounted premium, some require alarm service as a “condition precedent” to coverage.  This is not dissimilar to building fire codes and AHJ oversight of the fire alarm system.  A withdrawal of your fire alarm service could be critical to the subscriber.  While a subscriber may not be required to close a building if alarm services are terminated, loss of insurance coverage may have severe consequences, even beyond compensating for a loss.  For example, a tenant may be required to have insurance as a condition to its lease or a building owner may be required to carry insurance as a condition of its mortgage.  Because absence of insurance, when it is required, may very well be a non-curable breach of a contract requiring the insurance, the loss of a condition precedent to coverage is significant. 
          Something to keep in mind next time a subscriber threatens to cancel or terminate service or falls into default of the alarm contract.

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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