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12:22 PM
Nathan Golia
Nathan Golia
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Tennessee Fire Displays Dilemma For Carriers

It's likely you heard about the saga in rural Tennessee last week, in which a home burned to the ground because its owner did not pay a $75 fee for fire department services.

It's likely you heard about the saga in rural Tennessee last week, in which a home burned to the ground because its owner did not pay a $75 fee for fire department services.

Gene Cranick's home was in an unincorporated area. The nearby town of South Fulton offers the use of its fire department to residents of the incorporated area who pay the fee. Cranick did not, and when his home ignited, firefighters only watched it burn. They did, however, extinguish the flames when they spread to a nearby house owned by someone who did pay the fee.

The incident has spurred national debate on the same old boring stuff: government monopolies, common decency, the sanctity of contracts, potential free-market solutions, etc. But I'm curious about the insurance angle.

Do insurers in unincorporated areas with arrangements such as these request documentation that fire protection has been paid? Similarly, if a carrier has insured a house that has documented that it is covered — how can the insurer be sure that its neighbors have as well? Remember, in this case, a neighbor house caught fire only because the original flames could not be put out. Does that affect underwriting (or will it, going forward, after this incident?) For what it's worth, Cranick says that his insurance company will pay him something.

I would love to know how you would handle the situation. Feel free to comment.

Update: Insurance Journal has more on the insurance ramifications of this incident. One interesting tidbit:

Simmons said he knows of one other time this has happened. He said the insurance policy has a provision for a reduction in payouts if a fire protection service has not been subscribed but that the insurer has not enforced that in these situations.

The Cranicks said they also forgot to pay their fire service fee on time about three years ago. But the fire department then did not hesitate to put out a chimney fire and let them pay the fee the next day.

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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