Do not invalidate fire insurance

Don’t invalidate your fire insurance policy.

I find this a very strange case, but it shows how important it is to read the fine print, because if you ignore the conditions of the policy, your policy could be invalidated.

In this case it was a condition of the FIRE insurance that the SECURITY Alarm was maintained and monitored. These had been difficult times for the insured and he let the maintenance of the security alarm expire and since the ARC had not paid for 6 months, they stopped monitoring the site.

Vandals broke in and set fire to the factory. It was a furniture company and incurred losses of over £750,000.

The case reached the National Court, the judge had nothing but sympathy for the Directors of the Company and “was not pleased” to rule that since it was a condition of the combined insurance policy that the alarm be monitored by an external firm, Insurers did not have to deal with the claim.

Often, the insurance policies we take out have conditions that are directly related to the risk. We need to make sure that our cars have a valid ITV so as not to invalidate the policy. We are required to notify the insurance company if we receive a speeding ticket, but interestingly, you do not have to tell them if you decide to take the speed awareness course instead of paying the fine.

I have just come across a case, now before the Insurance Ombudsman, where an insurance company voided the policy and returned all premiums because the policyholder had inadvertently exceeded the value of the ‘valuables’ within their content insurance. They had insured the contents of their house for £60,000 but there was a clause that the value of valuables should not exceed 66% of this.

They had to take their daughter to hospital and while they were away thieves attacked taking £70,000 worth of goods and damaging property. In assessing the claim, the claims adjusters estimated the value of the valuables in the house to be in excess of £40,000. Normally, claims would be “averaged” to reflect the underinsurance, but the insurance company in this case argued that the underinsurance voided the policy. As I said, this case is in front of the ombudsman as I write.

Let’s go back to the case at hand where a fire insurance claim was dismissed as a security alarm and monitoring was allowed to lapse. Our clients run a hotel and there is someone at the front desk all the time, so if the fire alarm goes off there will always be someone on call to respond. We arrived at the time when the annual contract with the ARC [monitoring station] it needed to be renovated. The Hotel Manager wanted to cancel it as he considered it an unnecessary expense. I said I agreed, but asked him to check with his insurers to make sure they had no objections. The Underwriters confirmed; monitoring was a condition of the policy.

Often in the insurance policy there is a clause that the fire alarm is maintained in accordance with British standards. It would be interesting to know if a similar claim has been dismissed because the fire alarm has not been properly maintained.