When you purchase an insurance policy – whether that is for your home, business, car, or anything else – you often must provide representations and warranties to the insurer. These warranties are a way of balancing the risks of the insurer and the insured. Warrantied items are typically items which the insured has direct control over. There are two types of warranties: express and implied.
Express warranties are those which are clearly written out. An example of an express warranty would be where you agree to monthly safety inspections on the property. An implied warranty is one which arises from a natural conclusion in the insurance contract. An example of an implied warranty may be that you have an express warranty to maintain a boiler, and an implied warranty to make sure the systems connected to the boiler are also well-maintained.
Common examples of warranties include, but are not limited to: a warranty to regularly maintain equipment, a warranty to have regular inspections or audits, a warranty to remove debris or dangers from the property when you become aware of them, a warranty to keep a fire suppression system in working condition, a warranty to have a security system in place, or a warranty that you will train people on site about proper safety protocols.
Warranties have benefits for both the insurer and the insured. For the insurer, they provide certainty that a minimum standard of quality or safety is being met. For the insured, clear warranties often allow a lower policy payment, and following the warranty generally results in a safer or lower-risk property or worksite.
Ensuring that you properly adhere to any warranties in your insurance policy is paramount. If you fail to maintain the standard required, that may void your entire insurance contract. If your business suffers a fire, and you did not have adequate fire safety measures in place, your claim will likely be rejected. This is true even if the steps in the warranty would not have helped stop the fire from spreading. Similarly, if your insurer becomes aware of a lack of compliance, they can cancel your policy – leaving you uninsured until you comply with the requirements of the warranty, or find new insurance.
In summary, warranties encourage an insured to be proactive in protecting their property. Whether the insurance is for home, business, or health, there will almost certainly be some type of warranty in the policy. Make sure you read your policy carefully and thoroughly – and think about whether any express warranties lead to secondary implied warranties.
Navigating insurance policies, and the aftermath of when you need to make a claim with an insurance policy, can be difficult. If you need assistance with, or advice about, an insurance policy, contact our team of experienced lawyers.
