If your client's property insurance policy has a “Protective Safeguard” requiring a sprinkler, the insurance company may deny their claim if they don’t have one, even if they were never told of the requirement. Here are some tips on protecting your client's business.

Replacement Cost Coverage:

This insurance coverage promises to pay your client the full cost to replace damaged buildings and business personal property with new property of like kind and quality. Failure to purchase a “Replacement Cost” policy will result in the insurance company paying a depreciated value for your client's damaged property.


This is a penalty placed on the insured by the insurance company for the policyholder failing to insure the property to the proper value, or the percentage of value as required by the policy. For example, if your client's policy requires 80% coinsurance you must insure to 80% of the total value. In the event of a loss, if your client's property was not insured to 80% of the total value, then the insurance company will apply a penalty and reduce the amount payable for the claim. We recommend purchasing “agreed value” insurance which eliminates coinsurance. If your client must have coinsurance, then the lower the percentage the better, i.e. 80% is better than 90%.

Ordinance or Law / Code Upgrade:

This is insurance coverage for an increased cost to repair damaged property resulting from the enforcement of an Ordinance or Law. After a loss, the city or state may require certain upgrades to your client's property such as installation of hard-wired smoke detectors or sprinklers. The cost to install something that did not exist prior to the loss, but is now required by code, is not covered unless your client has this coverage. This coverage is typically not very expensive to purchase but may save your client thousands of dollars after a loss.

Protective Safeguards:

This is a policy provision requiring the property to have certain “Protective Safeguards” in place such as monitored alarms, sprinklers, etc. Most business owners do not know they have a “Protective Safeguard” endorsement requiring one of these devices. Failure to comply with this provision may result in the insurance company voiding coverage and denying the claim after a loss, even if your client was unaware of the endorsement or if it would not have prevented the loss. 


Loss of Income & Extra Expense:

Loss of Income coverage pays for loss of profit and continuing business expenses during the time your client's business is shut down as a result of a covered cause of loss. Extra Expense covers costs above normal expenses that your client incurs to resume operations and maintain business following a loss. For example, if your client rented a temporary facility to warehouse goods while its storage area is being repaired, this would be a covered Extra Expense.

Contingent Business Interruption:

This covers lost profits resulting from the interruption of the business of a supplier or customer due to a covered loss at their location. This little-known coverage protects your client when someone in their supply chain suffers a loss. For example, let's say you are a supplier whose business depends on a few key customers. If a key customer suffers a loss and stops buying your product you will lose substantial income. A standard Loss of Income policy will not pay for your loss since the trigger for coverage is damage to your property. Contingent Business Interruption coverage, on the other hand, is triggered by damage to the property of someone in your supply chain and therefore you can recover Loss of Income when they suffer a loss that impacts your business.




About the Author

Ethan A. Gross | Chief Executive Officer

Ethan A. Gross is the Chief Executive Officer of Globe Midwest Adjusters International. During his 30+ years as a public insurance adjuster, Mr. Gross has managed numerous complex claims resulting in favorable settlements on behalf of homeowners and multi-million dollar corporations throughout the United States and Canada. He is often appointed to serve as an arbitrator in resolving disputed insurance claims, and as an appraiser and umpire in statutory appraisals. Read More