Comment on loss of insurance for no fire alarm / Should you notify customer’s insurance carrier if fire alarm is inoperable February 25, 2023
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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 whitelist ken@kirschenbaumesq.com ****************************** Comment on loss of insurance for no fire alarm / Should you notify customer’s insurance carrier if fire alarm is inoperable February 25, 2023 *********************** Comment on customer losing insurance coverage for no automatic fire alarm from article on February 9, 2023 *********************** Ken Interesting article. I know from personal experience that sometimes the brokers fill out the application to make it easier for the client and then emails it over for the client to verify and sign. I wonder if the broker would have any liability if they accidentally checked the box indicating the FA and the client did not catch the error and just signed the application.... This would hold more true if it happened during switching insurance providers with the same broker and the broker knew or should have known from the prior policy application that the space did not have a Fire Alarm. Also from experience at our building and also from clients insurance companies the Insurance companies sometimes come down and do property inspections and request inspection reports for the protective systems. Had the insurance company come down and done an inspection and not caught the error I suspect they would have had some culpability for not finding the error during the on-site inspection but had they never been to the site I suspect they could just rely on the inaccurate application submitted. Eric W ************************** Response ************************** The scenario becomes a bit more complex when you consider that the issue can range from mere negligence to outright fraud. How so? A customer applying for insurance filling out the insurance application and checking the boxes may not really understand the difference between a manual call box and an “automatic fire alarm” [which is how the carrier’s application read], they may not have read the application carefully, they may not have cared or they may have actually decided to just lie about it to get the insurance. You see the continuum from mere negligence to outright fraud. Of course I use these terms “negligence” and “fraud” in what you may read as common vernacular rather than legal terms and concepts, which is how I mean them. Is not knowing what an automatic fire alarm and thinking you have one may not be negligent; perhaps only a jury or trier of facts if judge or arbitrator needs to decide that. Not reading the application or signing something you didn’t understand [assuming it’s written clearly and should be understandable, which not all contracts are] is negligent. Outright lying in this scenario is equated with misrepresentation and fraud is another way to see it. When it comes to the insurance policy the carrier didn’t really have to prove fraud because the policy had a “condition precedent” to coverage, and once that condition was not met there was no coverage. The term “automatic fire alarm” doesn’t really mean a lot to me, but I’m not in the fire alarm business. Is that really what a carrier needs to know? Is that the level of fire alarm protection the carrier thinks is necessary for it to write the coverage? Seems to me the application could have been more explicit by asking if the fire alarm was approved by local AHJ, whether a UL certificate was issued, whether it’s professional monitored and whatever other criteria local law may require. The other issue is the broker. In most cases the broker works for the customer, not the insurance company and I use the words “works for” loosely. The broker is the customer’s agent, not the insurance company’s agent [except when that’s flipped]. The Broker’s mistake is the mistake of the customer as far as the insurance company is concerned. The broker’s liability for making that mistake is another issue and yes there could be liability [which is why you have every right to ask your broker if it carriers its own professional liability coverage] if the broker departed from customary care and practice. A customer telling the broker the answer and the broker relying on that answer would likely relieve the broker of negligence. Just to round it out, the broker’s fraud would also be attributable to the customer as far as the insurance company was concerned, so there would be no coverage. ************************** Should notify customer’s insurance carrier if fire alarm is inoperable ************************** Ken: Subscriber has been ‘less than pleasant’ to deal with. Our lead service tech (and part time sales person) dropped by the premises to get a gander of what might be going on due to the amount of time that has passed since the initial alarm / water damage. Despite previous assuredness from the subscriber that the premises were still unoccupied my tech found the premises occupied, in violation of the fire code. Your thoughts how to craft this letter to keep us on the ‘up and up’ with all AHJs and the code? This subscriber is in a very affluent ‘cottage’ municipality and the AHJ really does enforce NFPA-72. Joe ************************** Response ************************** Fire alarm experts and I know you’re one of them, know the answer better than I do. NFPA-72 requires that the fire department [the AHJ] be notified if a monitored fire alarm is out of monitoring service for more than a specific period of time [can’t recall 8 or 12 hours]. The alarm dealer should notify the AHJ that the fire alarm is not being monitored. There is probably no need to get into specifics because I think all the fire department needs to know is that there is no monitoring, not necessarily why, unless you know that the customer decided on “fire watch” instead of a fire alarm, which is not likely. Even then you need to notify the AHJ. Is there more than one AHJ in a particular scenario and does NFPA-72 require notice to others who may, loosely in my opinion, be called AHJs? These may include a general contractor, an architect, an insurance company and of course, the fire department. Fire alarm experts can correct me but I seem to recall that NFPA-72 refers to the fire department for notice and does not call for other “AHJs” to be notified. But the duty to notify others beside the fire department may be imposed by contract, customer and practice, past performance causing the AHJ to expect notice or a poorly drafted Insurance Certificate. The other day I suggested getting the K&K Certificate of Insurance. For one thing it will not permit the insurance carrier or anyone else who sees and relies on the Certificate to sue you because your services were not being provided on the date of loss [assuming it’s not the date of the Certificate]. In the situation above two letters are probably the better idea. One to the fire department letting it know that monitoring and fire alarm services are inoperable [copy to the subscriber] and another to the subscriber explaining that you are required by law [and permitted by your Standard Form Fire All in One] to notify the fire department and you are ready, willing and able to come and repair the fire alarm, if that’s the case. If you have a Service Plan then you should at least survey the damage and offer to repair, some or all of which repairs may be covered by the Service Plan and if not covered providing a price for the repair. If you’re on a Per Call plan then you don’t have to do any survey or any repair. The customer can request repair and if you can agree on a price you can do the repair. The customer is not obligated to call you and you’re not obligated to respond; that’s the risk of a per call plan. ********************* STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - 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. *********************** ALARM ARTICLES: You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles updated daily ************************* THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily. https://www.kirschenbaumesq.com/page/alarm-exchange ************************* Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth ****************************** Getting on our email list / Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. ************************** 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
