1. Forms
2. MP
3. MP-07-03

What the form is

The MP T3 07 03 97, Protective Safeguards Endorsement for Sprinklered Locations and Restaurants, is an endorsement that modifies a Businessowners Policy, specifically the property coverage section. Its primary purpose is to require the insured to diligently maintain any protective safeguards listed in the endorsement's schedule (such as automatic sprinkler systems, fire alarms, or security systems) in complete and operational working order at the specified premises. This requirement is a critical component of the insurance agreement, as the insurer has likely relied on the presence and functionality of these safeguards when assessing the risk and determining the premium.

Classes of business it applies to

This endorsement is typically used for businesses where protective systems are crucial for mitigating potential losses. The title specifically highlights its applicability to:

• Sprinklered Locations: Any commercial property equipped with an automatic sprinkler system.
• Restaurants: Particularly those with cooking operations that rely on specialized fire suppression systems (e.g., hood and duct suppression).

Beyond these, it can apply to various commercial enterprises where the functionality of protective systems is a key underwriting consideration, such as:

• Retail stores with anti-theft or fire alarm systems.
• Warehouses or manufacturing facilities with fire protection systems.
• Office buildings with comprehensive fire detection and suppression systems.

Real-world example: A restaurant that has an automatic fire suppression system installed over its commercial cooking equipment would likely have this endorsement attached to its policy. If the restaurant fails to properly service and maintain this system, and a kitchen fire occurs that the system should have suppressed, coverage for the fire damage could be jeopardized due to this endorsement.

Special considerations

• Condition of Coverage: Maintaining the scheduled protective safeguards is a fundamental condition of the insurance coverage. If the insured fails to keep these safeguards in working order, and a loss occurs that could have been prevented or its severity reduced by the operational safeguard, the insurer may have grounds to deny the claim or reduce the amount paid.
• Notification of Impairment: The endorsement typically includes a provision requiring the insured to promptly notify the insurance company if any required safeguard is impaired, damaged, or not operational for any reason. This allows the insurer to assess the increased risk and determine if any temporary measures or coverage adjustments are necessary.
• Accuracy of Schedule: It is crucial that the schedule within the endorsement accurately lists all the protective safeguards the insured is required to maintain and the specific premises or parts of premises where they are located. Any inaccuracies can lead to misunderstandings or coverage disputes.
• Suspension of Coverage: Some versions of protective safeguards endorsements may state that coverage for perils that the safeguard was designed to protect against is suspended if the insured knew the safeguard was impaired and did not notify the insurer.

Real-world example: If a business owner turns off the building's main sprinkler system for a non-emergency renovation project for several days without informing the insurer, and a fire breaks out during this period, the Protective Safeguards Endorsement could be invoked by the insurer to deny coverage for the fire loss.

Key information for agents and underwriters

• Risk Assessment: For underwriters, this endorsement is a vital tool to ensure that the risk characteristics upon which the policy was written are maintained throughout the policy period. The operational status of protective safeguards significantly influences risk acceptability and rating.
• Pricing Implications: Properties with well-maintained and functioning protective safeguards often qualify for preferential insurance rates or credits. This endorsement helps ensure that the basis for such pricing (the continued operation of these systems) is upheld.
• Agent's Role: Agents must thoroughly explain the requirements and implications of this endorsement to their clients. This includes emphasizing the responsibility to maintain the safeguards, the importance of notifying the insurer of any impairments, and the potential consequences of non-compliance. This proactive communication can prevent significant coverage gaps.
• Underwriting Guidelines: Underwriters need to ensure that the correct protective safeguard symbols (e.g., 'P-1' for Automatic Sprinkler System, 'P-2' for Automatic Fire Alarm, etc., as per ISO or company-specific classifications) are accurately indicated in the schedule for each applicable location. They may also require periodic inspections or certifications to verify the maintenance and functionality of these systems.
• Documentation: Both agents and underwriters should ensure proper documentation regarding the discussion of this endorsement with the insured and the agreed-upon safeguards.