Changes to Commercial Insurance “Material Fact” Disclosure Requirements

Changes to Commercial Insurance “Material Fact” Disclosure Requirements

There is about to be a major policy change from within the insurance industry that now makes the requirements for disclosure a material issue and something that applicants will be asked by their broker or underwriter to confirm at the time of renewing their commercial insurance.

Currently, only breaches relating or appertaining to the Fire Safety Order or Regulatory Reform Order that result in a conviction or even a caution must be disclosed as part of a commercial policy renewal.

However, the quantum shift now is that ANY and ALL non-compliance issues relating to meeting current British Standards or the code of practice are now deemed material disclosure. Therefore it is now a formal requirement of the renewal of any commercial insurance cover that all previously identified non-compliance issues that have been raised over fire alarm, emergency lighting or other life safety elements for the building by either the installer or the incumbent service provider MUST be disclosed to the insurer as part of the renewal negotiations and the agreed continuance of cover.

IF there are undisclosed non-compliance issues that become known, then the insurer has the right to either ask for retrospective increased premiums OR they can repudiate completely and void the policy for this breach of the material disclosure.

Therefore whilst the insurance industry makes reference to these issues when negotiations for renewals are ongoing, there is a real need for service providers like ourselves to ensure that we make our customers fully aware of the issues that a refusal to allow rectification of non-compliance issues could bring.

This does not, of course, apply to agreed variations covered by signed validated and records but it will apply where a new installation has changed from the design cert that is not validated or where service and takeover works bring to the fore non-compliance issues that the client does not issue an instruction to rectify.

Cleary the insurance industry has realised that the assumption that the everyone’s fire & life safety systems are all 100% in accordance with the standards has been naïve and that they now need to ensure that the systems protecting the assets they insure and the people within them are fully suitable in line with the certification and Code of Practice expectations.

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