Lack of UL-300 Fire Suppression System Voids Restaurant Owner's Insurance Coverage

WARNING TO INSUREDS - Should I replace my obsolete dry-chemical fire suppression system with a new UL-300 compliant wet chemical system?

Answer: Yes-If you don't have a properly installed and maintained UL-300 compliant wet chemical system your property casualty insurance coverage may be voided, according to a recent court decision (French King Realty, Inc. vs. Interstate Fire and Casualty Co., Mass. Appeals Court). Here are the facts of the case.

In 1970 a dry chemical suppression system was installed in a Massachusetts restaurant. The owner failed to replace the system with a UL-300 compliant system (the UL-300 standard was issued in November 1994), despite these repeated warnings to do so: A 2000 bulletin from the system manufacturer recommended an upgrade to a new UL-300 compliant wet chemical system and announced a phase-out of manufacturer parts and support for the dry chemical systems.

In 2002, the restaurant's previous property casualty insurer declined to renew the policy because no "wet chemical system" had been installed. A February 2002 notice from the system manufacturer advised that the dry chemical system protecting cooking equipment would no longer be supported for service, repair or recharge. A November 2003 letter from a fire systems service company to the owner advised that the dry chemical system did not comply (as required in Massachusetts) with NFPA 96 (2001 edition) and was not in accordance with the manufacturer's UL listing for the system. A replacement cost of $3,250 was quoted for a new system. A June 2004 report from the service company to the owner advised that the dry chemical system was in "NONCOMPLIANCE" and it did not meet the NFPA 96 mandate to have a UL-300 complaint system. The system was "red-tagged" by the service company. A June 2005 letter from the service company to the owner again advised that the system failed to meet NFPA 96 and the UL listing as required by law. A replacement cost of $3,695 was quoted for a new system.

In June 2005 a city building inspector advised the owner that the red-tagged dry chemical system had to be upgraded a UL-300 compliant system in order to comply with building and fire code requirements, and without an upgrade the restaurant owner could not renew various licenses needed to continue operations.

In October 2005, a fire broke out and destroyed the restaurant. The dry chemical system failed to function properly. The insurance company denied coverage for the loss based on a number of policy exceptions in the Protective Safeguards Endorsement, including a coverage exclusion if the insured "failed to maintain any protective safeguard listed in the Schedule in complete working order." The Schedule required the restaurant to maintain a fire suppression system. The restaurant owner also failed to inform the insurer of a "suspension or impairment" of any protective safeguard, as required in the policy.

The restaurant filed a lawsuit against Interstate Fire and Casualty, seeking a court order declaring there was policy coverage for the loss and requiring the insurer to pay the fire loss claims. The trial court ruled against French King Realty, and the Massachusetts Appeals Court affirmed the lower court ruling. The restaurant's failure to have a properly installed and maintained UL-300 compliant wet chemical fire suppression system (a "protective safeguard" required by the insurance policy) justified the denial of coverage by Interstate Fire and Casualty, according to the appeals court. Other legal arguments made by French King Realty were also rejected.

To view the appeals court opinion, go to www.socialaw.com/slip.htm?cid=20724&sid=119. An article in Insurance Journal on this case can be viewed at www.insurancejournal.com/news/east/2011/07/20/206553.htm.

August 2011