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A burglar alarm is not a fire alarm



The plaintiff sued his insurance company to maintain his contractual rights. After the plaintiff's liquor store burned down, the defendant, the insurance company AmGuard, refused to pay the claim. I New Hamilton Liquor Store, Inc., et al. v. Amguard Insurance Company Case No. 17-13077, United States District Court Eastern District of Michigan Southern Division (July 23, 2020), the insurer justified the coverage being excluded by the plaintiff's failure to maintain an automatic fire alarm.

FACTUAL BACKGROUND

Talib Hermiz bought the New Hamilton Liquor Store, Inc., together with the company Mr. K & Hamilton, LLC ̵

1; which owned the 12150 Hamilton Ave building in Highland Park – on March 17, 2009. Hermiz consulted with insurance agent Rod Kathawa regarding this business. Kathawa asked Hermiz if he had an alarm. Hermiz said he did and Kathawa did not ask any further questions about the alarm. Hermiz signed the contract, which was then sent to him. The contract included a protective access ("PSE"). Hermiz admitted that he read PSE, but stated that he "did not understand."

PSE was headlined in all caps and warned that: "THIS CONNECTION CHANGES THE POLICY, PLEASE READ IT NOW." PSE provided the following: "We will not pay for loss or damage caused by or as a result of fire, if you before the fire: 1. knew of any suspension or deterioration in any protective measure specified in the schedule above and above which you had control; "Fully operational protection could not be maintained in the form above and over which you had control, in full operation."

Mr. Hermiz had only three motion detection alarms in his shop. Each alarm was close there was no fire alarm.

On Sunday, August 28, 2016, at 3:51:10, 3:51:11 and 3:51:13, all alarms went out and warned of movement in the store. then two calls to the store to find out if anyone was there, and a third call to the local police department.The police department sent an officer to the scene, and either through the officer's call or through any third party documents, Highland Par k Fire Department at 3:54 p.m. Firefighters arrived at 3:58 p.m. Subsequent investigation showed that the fire was a pin. Someone placed a ladder next to the store, climbed onto the roof, cut a hole through the roof with a chainsaw, and then poured gasoline into the hole.

Amguard denied Hermiz's claim. They based their denial on the fact that he had not installed an automatic fire alarm required by the agreement.

ANALYSIS

It is a question of whether the complainant's alarm system for motion sensor is qualified as an "automatic fire alarm" or not according to the insurance contract's protective measure. The Michigan Supreme Court ruled in 2003 that "even alleged" reasonable expectations "cannot replace the clear language of the agreement." Wilkie v . Auto-Owners Ins . Co ., 469 Mich. 41, 60 (2003).

Whether Hermiz reasonably believed he was fulfilling his insurance business is irrelevant. An insured is obliged to read his insurance policy and ask questions about coverage within a reasonable time after the insurance has been issued.

PSE is a condition that precedes the agreement and a plaintiff's failure to comply with its terms will preclude coverage.

The Court's first task was to determine whether the agreement was ambiguous or not. If the court finds that no reasonable person can dispute the meaning of ordinary and ordinary contract language, the court must accept and enforce the language as it is in writing. The importance of such a clear and unambiguous contract language is a matter of law.

The term "automatic fire alarm" in the PSE did not contain a definition for fire alarm. Both plaintiffs and defendants claim that PSE is unequivocal and should be read in their favor. The plaintiff claims that a "fire alarm" is any alarm that can detect a fire, as the motion sensors in the store did. The defendant claims that a "fire alarm" clearly refers to an alarm that is intended to detect fires.

"Fire alarm" is not an ambiguous term. After checking various dictionary definitions, the court found that the term "fire alarm" clearly refers to a device intended to warn people of the occurrence of a fire. Plaintiff's alarm system does not fit this definition. The alarm was not even a fire alarm, because the alarm would not warn any people in the construction of a fire. The alarm was not activated until people in the building left, as the alarm warned of any human presence and was therefore only used after the building was closed. It was an alarm designed to prevent intrusion, not to protect against fires, which can also start while businesses are open.

There is no circumventing the simple fact that the plaintiff's alarm was an automatic burglar alarm, not an automatic fire alarm. This is the reason why the alarms were grouped around the entrance to the building. That is also the reason for the National Alarm on August 28, 2017 at 3:51:09 a warning described in the log as INTERIOR BURG ‘ZN5 BACKROOM MOTION. That is also the reason why the police, not the fire brigade, were originally sent to the scene.

In the light of the PSE context, therefore, the plaintiffs' argument – that they were not aware that the PSE required an automatic fire alarm – was unreasonable. Given the unequivocal use of the term "fire alarm" every day, there is no reasonable way to understand the term to include the alarms found in the plaintiff's store.

It acknowledged that the PSE is clear that the failure to maintain an automatic fire alarm or knowledge of its suspension or impairment is grounds for excluding fire coverage. Its common language does not imply that the effectiveness of any unit in warning of the fire in question is at all relevant to whether this condition of exclusion is triggered. As they did not comply with the PSE, the plaintiff could not recover due to breach of contract.

Talib Hermiz may have felt that he had adequately protected his assets by paying for both an automated alarm system and purchasing an insurance plan. However, there is no indication that he met the terms of the insurance contract.

He signed an approval that he had a fire alarm, and that if that alarm system was not maintained, coverage for fire damage would be excluded. The insurance proposal's proposal for a brief judgment was granted.

PSEs are issued by insurance companies to ensure that insurance applications are truthful and provide the insurer with a way to protect itself against false statements in an insurance application that promise real estate protection. The PSE eliminates the need to revoke a policy of misrepresentation of a material fact and establishes a condition that precedes coverage. Violation of the condition eliminated the right to reclaim the benefits promised by the police. To testify that he read PSE and did not understand that it was not enough because he could easily have asked his insurance broker what it meant. Because a PSE often results in a premium discount, Hermiz incorrectly saved a few dollars in premium and cost him the opportunity to rebuild and reopen his liquor store.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant specializing in insurance coverage, handling insurance claims, bad faith insurance and insurance fraud almost equally for policyholder. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and attorney handling attorney and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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