Fire as a Result of Burglary Covered?

Q

We insure a warehouse with the CP 00 10 04 02. The policy is endorsed with form CP 12 11 10 00, burglary and robbery protective systems, and the insured received the appropriate rate credit for having a working burglar alarm.

One night after the warehouse was closed and all employees had gone home, two men broke into the building. They apparently knew about the alarm, because they cut the wires to it before breaking in. While inside the building, the burglars set a fire that did extensive damage.

Now the insurer is denying the claim for the fire damage, because the insured did not keep the alarm in proper working order, as required by endorsement CP 12 11.

We think they are wrong. What's your opinion?

New Jersey Subscriber

A

The insurer is wrong to deny the fire claim you describe. When the insured purchased his policy with endorsement CP 12 11 attached, he received a rate credit for having and maintaining a burglar alarm. That endorsement goes on to say that the policy will not pay for theft loss, if the alarm system is not in working order.

But the loss here is a fire. In order for the exclusion to apply, the insured must “[know] of any suspension or impairment” of the alarm system. Since the perpetrators cut the wires after the business was closed, it was impossible for the business owner to know that the alarm system was not working.

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