Policyholders who make claims based on hazards that are clearly covered often are dumbfounded when their insurer refuses to pay. However, policies that cover residential and commercial property damage often are riddled with exceptions and conditions that can limit or void coverage, so the entire policy must be carefully reviewed. Policyholders need to make sure that they do not run afoul of conditions imposed by their policy, or they might be left out in the cold despite having an otherwise valid claim for loss.
A recent decision by the Florida 5th DCA, Depositors Ins. Co. CC&C of Lake Mary, provides an example of the potentially devastating consequences for a policyholder that fails to satisfy a “condition subsequent” when filing a property loss claim. This two-part blog post analyzes this decision. Part I of this article discusses the relevant facts of the case while Part II of the blog looks at the court’s reasoning and the relevance of the decision to policyholders. A commercial policy was purchased to cover a surf shop operated by the policyholder. While the policy generally covered losses caused by “theft,” the homeowner’s claim for property loss was denied following a burglary. The insured contended that the insured failed to satisfy a “condition subsequent” under the policy that required implementation of certain “protective safeguards,” as well as notification if any of the security measures were not in place. While the trial court sided with the insured, the 5th DCA reversed and ruled in favor of the insurance company.
The policy contained provisions requiring the business to implement a range of security measures including a burglar alarm. These security precautions included the following:
This premise has one or more PROTECTIVE SAFEGUARDS identified by symbols herein. Insurance at this premise will be suspended if you do not notify us immediately if any of the safeguards are impaired . . . .
YOU RISK THE LOSS OF PROPERTY INSURANCE COVERAGE AT PREMISES DESIGNATED IN THE DECLARATIONS IF YOU FAIL TO MAINTAIN ANY OF THE APPLICABLE PROTECTIVE SAFEGUARDS, LISTED BY SYMBOL IN THE DECLARATIONS.
Our requirement that you maintain the protective safeguard is in consideration of a significant premium reduction. If you do not wish to commit to the requirements expressed in this endorsement, at our option, your insurance may be continued. However, the credit for such protection would not be applied.”
The policy further provided as follows:
“B. This Insurance will be automatically suspended at the premises shown in the Declarations if you fail to notify us when you:
- Know of any suspension or impairment in the protective safeguards
- Fail to maintain the protective safeguards over which you have control in complete working order . . . .”
A “Central Station Burglar Alarm” is one of the protective safeguards referenced in the policy endorsement. The insured had a policy in place with central monitoring, but the alarm monitoring company provided notice that the service would be terminated unless a past due balance of $528.32 was paid. When the insured failed to make the account current, the alarm monitoring company sent a letter that the service was being cancelled. Therefore, the company would not be dispatching emergency responders in the event an alarm was activated.
Approximately three weeks after the alarm company gave notice of cancellation of the monitoring service, the business was burglarized. While the security system was armed, there was no monitoring or dispatching of police because of the termination of alarm company services.
The insurance company sent the insured a check for unearned premiums covering a period that commenced when the alarm monitoring service was terminated and running through the day it was reinstated after the burglary. The insurance carrier denied coverage for property loss from the burglary based on the contention that the commercial insurance policy was suspended when the crime occurred because of failure to comply with the “condition subsequent” of continued alarm monitoring and/or failure to notify the insurer of loss of the alarm company contract.
When the insurer denied the business owner’s claim based on property stolen during the burglary, the insured filed a lawsuit. The insurer claimed that the policyholder did not have coverage at the time of the crime because of failure to comply with the “condition subsequent.” The policyholder allegedly failed to maintain centralized alarm system monitoring or to notify the insurer when the service was terminated.
The failure of the insured to comply with these conditions would end up undermining the insured’s claim as explained in Part II of this blog post. If you have questions about a homeowner’s insurance policy or your insurer refuses to pay your claim, we invite you to contact us to learn about your legal rights and options. My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.