Is It Covered? Duties of the Insured

Many people think that their insurance policy only details what they are covered for in the event of a loss. While it does include the types of losses the insurance carrier will reimburse and what types of losses are excluded, it is a contract between two parties. In this case the investor (the insured) and the insurance company. This means that while the insurer has responsibilities to the investor because of the premium they pay, the investor also has responsibilities as the insured. The duties of the insured are to protect the property from unnecessary losses, implement protective safeguards, and cooperate with the insurer during the claims process. 

What happens if my investor client does not fulfill the duties of the insured?

As mentioned earlier, the duties of the insured are to cooperate with the insurer during the claims process, protect the property from unnecessary losses, and implement protective safeguards. Failure to do so can result in a claim being denied when it might have otherwise been covered. Not cooperating with the insurance company at any other time during the business relationship may result in rate increases, non-renewal, or even cancellation of coverage. 

What is a protective safeguard?

Protective safeguards are property conditions that must be met for coverage to be available in the event of a loss. Without them, the investor may not be covered for any damage associated with their absence. Two common examples are: 

1. to have working smoke detectors in each unit, or 
2. to have vacant properties boarded and secured. 

What Does the “Duties in the Event of a Loss or Damage” Section Include?

This section in the investor client’s policy lists what is expected of them in case of a loss at the property and during the claims process. 

Is There a Time Limit to Submit a Claim?

Yes, most insurance policies require the insured to report a loss within a timely manner, generally 60 days. Investors should report any damage at the property immediately if they intend to file a claim, even if they don’t know all the details about a loss right away. Timely reporting of a loss can lessen the risk of additional damage at the property, and it helps the claims process move along smoothly for all parties. Small details can become crucial to the fair settlement of a loss and can be easily lost if too much time goes by before they are reported.

What Does the Technical Lingo for These Requirements Look Like in the investor’s policy?

Sample policy language may look like this: 

Protective Safeguards

“As a condition of this insurance, you are required to maintain the protective devices or services listed in the Schedule above: 

“P-9”: Operable smoke detectors in each unit.” 

Duties in the Event of a Loss or Damage

“You must see that the following are done in the event of loss or damage to Covered Property: 

1. Notify the police if a law may have been broken. 
2. Give us prompt notice of the loss or damage. Include a description of the property involved. 
3. As soon as possible, give us a description of how, when and where the loss or damage occurred. 
4. Take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance. However, we will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss. Also, if feasible, set the damaged property aside and in the best possible order for examination. 
5. At our request, give us complete inventories of the damaged and undamaged property. Include quantities, costs, values and amount of loss claimed. 
6. As often as may be reasonably required, permit us to inspect the property proving the loss or damage and examine your books and records. Also, permit us to take samples of damaged and undamaged property for inspection, testing and analysis, and permit us to make copies from your books and records. 
7. Send us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within 60 days after our request. We will supply you with the necessary forms. 
8. Cooperate with us in the investigation or settlement of the claim. 

We may examine any insured under oath, while not in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim, including an insured’s books and records. In the event of an examination, an insured’s answers must be signed.” 

Timely Reporting of Losses

“Discovery: It is understood and agreed by the Insured that, in the event of any occurrence which may result in loss, damage, injury, expense or claim for which the Insurer may become liable under this policy, notice shall be immediately given to said Insurer. Furthermore, the Insurer is not liable, under any circumstances for any loss, damage, injury, expense or claim of whatever nature, which is insured by this policy; unless any and every notice of claim, pleading and paper of any kind relating to such occurrence shall be given to the Insurer within 60 days of the date of loss or when the condition becomes known to the Insured.” 

*As insurance policies may vary, investors should check their own policy for language specific to covered properties.     

Does my investor client really need to read the entire policy?

To fully understand the policy, including the duties of the insured, investors should read and understand the complete insurance contract. This way, investors won’t miss details that could impact their coverage. In addition to the “Protective Safeguards” and “Duties in the Event of a Loss or Damage” sections, the policy may also detail precautions the insured must take for coverage to be available within the definition or description of that coverage.

Water damage caused by a burst pipe is a perfect example of this. Many policies specify that for coverage to be available for this type of loss, the investor must either maintain heat in the building or shut off the water and drain the water supply.

What can my investor client do to maintain coverage availability?

Investors should know what is in their policy: The investor should refer to the sections of their insurance policy that address protective safeguards and their duties in the event of a loss- these cover the duties of the insured. Your investor clients must know what their insurance company expects of them to ensure their coverage is not jeopardized. If you or your client have questions, don’t hesitate to ask your Sales Manager.