1. Forms
2. FP
3. FP-12-02

What the form is

The FP 12 02 Protective Safeguards endorsement is a crucial component of farm insurance policies. Its primary purpose is to ensure that any protective systems or services for which the insured has received a premium discount are maintained in operational condition. This endorsement typically applies only to the fire cause of loss and outlines the insured's responsibilities regarding these safeguards. If the insured fails to maintain these safeguards and a loss occurs that could have been prevented or mitigated by the safeguards, coverage for that loss may be jeopardized.

Classes of business it applies to

This endorsement is specifically designed for farm and agricultural businesses that have installed protective systems. Examples include:

• Farms with automatic sprinkler systems in barns or storage facilities.
• Agricultural operations with functioning fire alarm systems connected to a central station or fire department.
• Farms that maintain specific fire suppression equipment or services as agreed with the insurer.
• Operations with security services or other protective measures listed in the policy schedule.

For instance, if a dairy farm receives a premium reduction for having a well-maintained sprinkler system in its main milking barn, this endorsement would be attached to their policy. It underscores the farm owner's obligation to keep that sprinkler system in working order.

Special considerations

Key considerations for the FP 12 02 endorsement include:

• Condition of Coverage: Maintaining the protective safeguards is often a condition of coverage for losses that the safeguards were designed to prevent (primarily fire). Failure to do so can lead to denial of a claim.
• Notification Requirement: The insured is usually required to notify the insurance company if they know a safeguard is not working or has been suspended.
• Premium Credit: This endorsement is used when the insurance company provides a premium credit because of the listed protective safeguards.
• Replacement of Other Forms: The FP 12 02 (04 16) replaced the IL 04 15 for farm policies.

For example, if a grain storage facility has its sprinkler system temporarily shut down for maintenance, the insured should promptly inform their insurer as per the conditions of this endorsement.

Key information for agents and underwriters

Agents and underwriters should pay close attention to the following:

• Verification of Safeguards: Underwriters should verify the existence and operational status of the protective safeguards before offering a premium credit and attaching this endorsement. Regular inspections might be advisable for certain risks.
• Clear Communication: Agents must clearly explain the insured's responsibilities under this endorsement, particularly the consequences of failing to maintain the safeguards.
• Documentation: The specific protective safeguards should be accurately listed in the policy schedule.
• Risk Assessment: The presence and reliability of protective safeguards are significant factors in assessing the overall risk profile of a farm operation, especially concerning fire hazards. A farm that diligently maintains its fire suppression systems presents a lower risk than one that does not.
• Pricing Impact: The premium credit offered should be commensurate with the reduction in risk provided by the safeguards. If safeguards are not maintained, the basis for the credit is undermined, and the underwriting assumptions are no longer valid.