We have an important insurance question for all business owners: does your commercial policy (CP) contain a “protective safeguards” provision? Please check carefully – or ask your local insurance agent. If the answer is yes, then we have one more question: are you complying with those protective safeguards?
Protective safeguards are an area of insurance we have discussed before. Essentially, the insurance company will give you a reduction in your policy premium if you promise to undertake certain precautions – protective safeguards – that protect your property from a loss. These precautions that you promise to implement usually involve preventive devices or measures, such as smoke alarms, burglar detection systems and sprinklers.
Here’s a little scenario that will help you appreciate the importance of complying with the protective safeguards within your CP. Suppose you’re the proprietor of a family-owned business – maybe a hardware store that has been in the family for several generations. The retail location for this store experiences a small fire in the basement, which started due to a glitch in the electrical panel. The fire caused some light soot and smoke odor throughout the store – overall, pretty minimal damage, but still a problem that warrants an insurance claim.
In the CP, the policy had listed applicable protective safeguards which required the business to install and maintain a central station burglar alarm. These types of alarms, when tripped, automatically go to the local police station. The hardware store did have an alarm bugle – but it wasn’t connected to a central police station. Because of this non-compliance, the insurance carrier tried to deny the hardware store owner’s insurance claim. You can see the problem here. This property loss was from a small fire in the electrical panel – not a burglary. So, compliance with the protective safeguards wouldn’t have helped in this case. The burglar alarm had nothing to do with it.
Of course, if the store had been robbed, this protective safeguard would have certainly applied and they would not qualify for coverage. Or if they had a fire, and the protective safeguard required a fire alarm to the central fire station, the business would stand to get denied for coverage. But, in this example, because the protective safeguard in question had no relation to the cause of the loss, it’s not applicable. The carrier, despite its attempts to deny coverage, should ultimately pay this claim in full.
Avoid putting your business at risk. If you have a protective safeguard provision, make sure you are in compliance. And remember that a local insurance agent will not only help you save money, but will take the time to fully explain your policy and ensure you have full and adequate coverage.