There was a lot of finger pointing in a recent case involving the property owner of a shopping center and an insurance company. The finger pointing all revolved around whether or not the insurance company should pay a claim following a burglary.

The property owner of the shopping center filed a claim after an unoccupied retail unit in the shopping center was burglarized. The perpetrators apparently forced their way through a locked rear door, stealing copper wire and other electrical equipment. The same store had been burglarized approximately one year earlier and it is alleged that the unit’s burglary alarm system was rendered inoperable at that time and never repaired.

 

The insurance company declined to pay for the claim on the grounds that the property owner’s loss was excluded under the policy because the property owner failed to maintain a centrally monitored burglar alarm system at the unit and alternatively, because the property owner made a material misrepresentation on its insurance application saying the shopping center was protected by a centrally monitored burglar alarm.

 

The property owner filed a complaint against the insurance company and claimed that the contract provision the insurance company relied on to exclude it from paying the claim was ambiguous and that it actually had not made a material misrepresentation on its application. The property owner further claimed that the insurance company had waived enforcement of the exclusion by continuing to accept premiums after being put on notice that there was not a functioning alarm system in the unit.

 

The insurance company then filed a motion for summary judgment seeking to dismiss the complaint.

 

First, the court needed to decide whether or not the relevant provisions were ambiguous as the property owner claimed. The court pointed out that the insurance contract was issued subject to a “burglary and robbery protective safeguards endorsement,” which added certain conditions to the contract, including that no losses or damages would be paid for if the insured knew about a non-working alarm and failed to notify the insurance company or if the insured failed to “maintain” any alarm listed in the contract. 

 

Even though the property owner argued that these provisions were ambiguous as the word “maintain” did not imply that the “insured was required to install burglar alarms at all locations where they did not exist,” the court disagreed. The court pointed out that the property owner ignored the clear meaning of the verb “maintain,” which had three consequences. First, if such a system has been installed and is operative at the time the contract comes into effect, it must be kept operational through the life of the contract. Second, if such a system has not been installed by the time the contract becomes effective, it must be installed and kept operational through the life of the contract. Third, if such a system has been installed but is not operational at the time the contract comes into effect, it must be made operational. Therefore, the court found there was no ambiguity.

The next issue was whether the exclusion was waived by the insurance company. The court pointed out that a reasonable fact finder could find that the insurance company had waived its exclusion because after having received the report showing that there was not a functioning, centrally monitored burglar alarm at the site it still failed to cancel coverage, adjust the policy premium or demand that the property owner come into compliance. Further, even if it is true that the policy premiums were paid prior to the inspection, it is not merely acceptance of a premium, but also the continuation of coverage that can constitute a waiver of an exclusion defense. The motion for summary judgment to dismiss the complaint was therefore denied, leaving the property owner pointing the last finger.