In office insurance, it is warranted that the agreement which is there at the time of the policy inception, will be there throughout the policy tenure. There will be no variation in the terms and conditions of the policy without the written consent of the insurer. For the purpose of the warranty, the insurer is obligated to do the following –
- Proper safety checks
- Following preventive maintenance measures
- Rectification of loss or damage due to normal operation or ageing
Overall, in office insurance policy, a warranty is:
- A legal undertaking which is between the policyholder and the insurance company
- A matter of understanding between the policyholder and the insurance company
A warranty implies that the office and equipments are insured lawfully. Any content, object or person attached to the office insurance undertaking should not be illegal.
In office insurance, there are various types of warranties like –
- Book keeping warranty which means that the policyholder should maintain a complete set of books, accounts and an accurate daily record of all the inventories. Along with it, it is necessary to have a proper record of all the stocks in hand and inventories along with the stock of books which has been removed to another secured building. Further, this warranty is applied separately to each and every location from which the policyholder conducts business. Any transfer or movement of stocks, inventories, etc.; shall be between the meaning of this warranty
- Machinery Breakdown Warranty means that the plant may be turned over periodically only for some maintenance purposes. In case the plant has to be used otherwise, then it is necessary for the policyholder to inform the insurance company and pay additional premium as may be required. In case the insurer fails to inform, the insurer’s liability shall cease
A warranty is important as it is a legal statement which acts as a promise of faith. In case any warranty statement or fact is not followed, the insurance policy becomes null and void. In any situation, the policyholder can’t break the warranty or legal promise. It is important to note, even if the breach of warranty is not applicable to the given risk it will be still applied.
L.J Engineering is a reputed name in the market. The company has purchased office insurance policy for its Pune office. The company has the office insurance policy to get financial coverage against various types of risks and losses, like fire, theft, burglary, earthquake, flood, etc.
At the time of buying office insurance policy, L.J Engineering clearly stated that it would install fire extinguishers at different locations and also do their proper maintenance. However, last year, a fire erupted at its office due to short-circuit. There was a loss of Rs 20 lakh, and as the company had office insurance policy, it approached the insurer for the claim settlement. In this case, the insurer appointed a surveyor to compute the extent of losses or damages. Here, the surveyor found that though the company installed fire extinguishers at different locations of the office, they were not properly maintained, and even employees were not given proper training on their usage.
Check More: Which Expenses Are Covered by The Fire Policy?
In this case, the office insurance company did not settle the claim of the engineering company. Knowing the fire peril, the engineering company did not pay heed to the safety measures and due to which the loss happened. It was a clear breach of warranty.
As their office was more vulnerable to perils, like fire, theft, the engineering company clearly stated in the agreement that it will take all necessary precautions and also guide its employees on the safe usage of items. However, it did not take steps towards the safety mechanisms, and due to which fire erupted. Therefore, it was considered as the breach of warranty. Due to this breach, the insurer was right in refusing the claim.
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