The insured’s building sustained damage from a fire. The insurer denied coverage contending the building lacked a “Local Fire Alarm” that was “in complete working order” as required by the policy.
There was no dispute that there was a “Central Station Burglar Alarm” in place and operational. The dispute was whether there was a “Local Fire Alarm” within the meaning of the policy. The term was not defined in the policy.
The policy said that words not defined were to be understood “according to their plain and ordinary meaning”.
Both the lower and appeal court held that both alarms were local fire alarms within the meaning of the Policy Safeguards endorsement which provided that as a condition of the insurance the insured was required to maintain among other things a local fire alarm.
The policy contained an exclusion that the insurer “will not pay for loss or damages caused by or resulting from fire if, prior to the fire” the insured’s “failed to maintain” any listed device “in complete working order”.
On the evidence the fire alarm was “a device that makes a loud sound to warn people when there is a fire”. The court referred to a recent unpublished case which interpreted the plain language of “Fire Alarm : Local” in a similar insurance contract holding that “as requiring an alarm that sounded in the particular place that it alerted”.
The court held that the alarm panels met those definitions. They had dedicated fire-alarm buttons which would trigger alarms from the panels themselves and from sirens.
The court was satisfied that there was a “Local Fire Alarm” within the meaning of the policy which was required to respond.
The court also pointed out that it was the insurer’s burden to establish the exception and that the alarm panels were not in complete working order. No evidence had been presented in that regard.
Where an exception is relied on, insurers must have evidence of a breach of its terms. Secondly, if unusual terms like ‘local fire alarm’ are relied on, they should be defined and not left to plain and ordinary meaning interpretation.