Understanding the Impact of an Automatic Fire Extinguishing System Warranty on Your Business Insurance Policy

By Jenny Holly Hansen | WBN News | May 7, 2025

For business owners, especially those operating in industries with increased fire risk—such as restaurants, manufacturing facilities, or auto repair shops—fire protection systems are not just a safety measure, they’re a key part of the risk management strategy. One important but often overlooked component of a commercial insurance policy is the Automatic Fire Extinguishing System Warranty. This clause can significantly influence how coverage responds in the event of a loss—and whether a claim is paid at all.

What Is the Automatic Fire Extinguishing System Warranty?

This warranty is a clause included in many commercial property and business interruption insurance policies. It states that if your business relies on an automatic fire extinguishing system (such as an overhead sprinkler system, chemical suppression system in a kitchen hood, or a foam system in industrial operations), then that system must be properly maintained and in good working order—as a condition of your insurance coverage.

In other words, if a fire occurs and the system was not maintained according to the requirements set out in your policy, the insurance company may deny or limit your claim.

How This Affects Business Owners

1. Maintenance Becomes a Legal Obligation, Not Just Best Practice

Regular inspections, servicing, and certifications aren’t optional when this warranty is in place. You may be required to:Failure to comply could void part or all of your fire coverage.

• Test your system on a set schedule (often semi-annually or annually)
• Keep detailed records of all maintenance and inspections
• Use certified professionals for inspections and repairs
1. Claim Denials Due to Non-Compliance

Imagine a kitchen fire breaks out in a restaurant, and the overhead hood suppression system fails to activate. If later investigation reveals the system hadn’t been inspected in over a year—despite policy requirements—the insurer may deny the property and business interruption claim, even if the damage is substantial. That could be the difference between rebuilding and closing permanently.

1. Premium Discounts for Compliance

On the flip side, maintaining a fire suppression system to code—and providing proof—may lead to reduced premiums. Insurers reward businesses that demonstrate lower risk through strong risk management practices.

1. Impact on Coverage for Tenants and Landlords

If you're leasing space, this warranty may also create shared responsibilities. Landlords often maintain base-building systems, but tenants are usually responsible for interior equipment like kitchen suppression systems. It’s crucial that lease agreements clearly define these roles—and that both parties understand the insurance implications.

What You Should Do as a Business Owner

• Review Your Policy Carefully: Look for any fire-related warranties or endorsements. Don’t assume they only apply to industrial operations—they’re common in retail, food services, and commercial rental units.
• Schedule and Document Maintenance: Set calendar reminders and ensure that maintenance is carried out by licensed technicians. Keep a binder (physical or digital) with all your inspection reports and service records.
• Talk to Your Insurance Broker: If you're unsure whether you’re compliant, or if your policy includes this warranty, have your broker walk you through it. They can also help you understand any local code requirements and what documentation you need in the event of a claim.

Final Thoughts

The Automatic Fire Extinguishing System Warranty is not just another technicality in your insurance policy—it’s a critical safeguard that ties directly to your ability to recover from a loss. As a business owner, being proactive about maintenance isn’t just smart; it’s essential. Compliance protects more than your insurance—it protects your livelihood.

Let’s Keep Talking:

Jenny is a business insurance broker with Waypoint Insurance.

She is also a business development consultant with Impresario Partners, helping Canadian Business expand overseas.

She can be reached at 604-317-6755 or jholly-hansen@wbnn.news. Connect with Jenny on LinkedIn at https://www.linkedin.com/in/jenny-holly-hansen-365b691b/.  Connect with Jenny at BlueSky: https://bsky.app/profile/jennyhollyhansen.bsky.social

Let’s Meet Up:

Jenny Holly Hansen is a cohost with Chris Sturges of the Langley Impact Networking Group. You are welcome to join us on Thursday’s from 4pm to 6pm at: Sidebar Bar and Grill: 100b - 20018 83A Avenue, Langley, BC V2Y 3R4

TAGS:  #Jenny Holly Hansen # Business Insurance #Automatic Fire Extinguishing Systems Warranty #Commercial Property Insurance Policy