A year ago, I wrote about the trial court decision in 3371 Reading, LLC v. Liberty Mutual Group, in Don’t Let Protective Safeguards Become Your Policy’s Poison Pill. I warned policyholders that protective safeguards endorsements can become poison pills hidden deep within builders risk and commercial property policies. The federal district court had ruled against the policyholder because the insured failed to erect fencing around a renovation project as required by the policy. At the time, I cautioned that these endorsements are increasingly being used as technical traps to deny otherwise valid fire claims. Now, the Sixth Circuit has partially reversed that decision and issued an opinion that deserves close study by those selling builders risk policies, those involved with builders risk policies, and all of my insurance coverage nerd friends. 1
In this case, the insured building shared a common wall with an adjacent structure, bordered a public sidewalk, and sat tightly against neighboring properties. The policy required a six-foot fence “completely surrounding the jobsite.” Yet, the insurer’s own underwriter admitted he knew before the policy was issued that constructing such a fence was physically impossible. The insurer nevertheless issued the policy, accepted the premium, and then denied coverage after the fire because no fence completely surrounded the property.
The Sixth Circuit finally asked the obvious question: whether an insurer can enforce a condition precedent that cannot physically be performed. The majority opinion recognized that if a policy requires something impossible as a condition to coverage, the provision becomes unenforceable. The court held that the fencing requirement could not be enforced because compliance was impossible due to the shared wall configuration of the property. The court also noted another critically important point often overlooked in protective safeguards litigation. There was no evidence that the absence of the fence caused or contributed to the fire. The fire’s origin was unknown.
Insurers have traditionally attempted to transform protective safeguards endorsements into automatic forfeiture clauses. If a sprinkler valve is closed, if an alarm is impaired, if a service contract lapses, or if fencing is absent, many insurers argue that coverage disappears regardless of whether the condition had anything to do with the loss. Courts in many jurisdictions have accepted that harsh result. But the Sixth Circuit signaled that there must still be limits rooted in fairness, practicality, and common sense.
Judge Readler’s dissent is equally important because it reflects how many judges still think about these endorsements. The dissent argued that courts should interpret contracts in ways that preserve their meaning rather than invalidate them. According to the dissent, the insured could have constructed a three-sided fence connected to the shared wall and thereby substantially complied with the endorsement. That reasoning demonstrates why these disputes remain dangerous for policyholders. Many judges remain deeply reluctant to excuse noncompliance with conditions of coverage even where the policy wording is awkward, commercially unreasonable, or nearly impossible to satisfy.
The larger lesson is that protective safeguards endorsements are no longer minor technical endorsements buried in the back of the policy. They are among the most dangerous provisions in modern commercial property insurance. They routinely operate as coverage elimination devices.
Policyholders must read them carefully at the point of sale of the policy. Brokers must specifically discuss them with clients rather than merely forwarding the policy by email. Underwriters must stop inserting boilerplate requirements that cannot realistically be satisfied on the insured premises. Claims professionals should stop pretending that every technical noncompliance automatically voids coverage regardless of prejudice or causation.
What troubles me most about this case is that the insurer apparently knew from day one that the literal requirement could never be satisfied. That is setting a coverage trap.
Insurance is supposed to protect against fortuitous loss, not create a scavenger hunt where coverage disappears because an impossible condition was hidden inside an endorsement stack. The Sixth Circuit did not go nearly far enough in condemning that practice. But at least it recognized that insurers cannot demand the impossible and then call the result a breach.
Thought For The Day
“Good fences make good neighbors.”
—Robert Frost
1 3371 Reading, LLC v. Liberty Mutual Ins., No. 25-34-39, 2026 WL 1430387 (6th Cir. May 21, 2026). See Policyholder Brief and Insurer Brief.
