The Records Warranty
A Warranty that Must Be Established to Collect on a Claim
These clauses, sometimes called an “iron safe clause” because early policies required records to be kept in a “fire proof iron safe” and required the insured to keep a record of its accounts and inventories and thus enabled the insurer to verify the value of the insured’s loss by fire.
In Dale v. Iowa Mut. Ins. Co., 254 S.E.2d 41, 40 N.C.App. 715 (N.C. App. 1979) the stipulations of the iron-safe clause are more especially addressed to the insurance of the goods, but the premium on the policy is entire; the concluding stipulation is to the effect that if the insured fails to produce the set of books and inventories as required by the contract, the policy shall become null and void, and the “failure shall constitute a perpetual bar to any recovery thereon”; and, furthermore, the goods are insured “while they are contained in the storehouse, and not elsewhere”; thus making the risk on the goods and on the building substantially identical.
The authorities uniformly sustain the validity of the iron-safe clause in an insurance policy, on the ground that its provisions, requiring itemized inventories and a set of books, ‘clearly and plainly presenting a complete record of business transacted,’ provide check upon fraud, and by a compliance therewith a means of ascertaining with reasonable certainty the amount of goods on hand would be forthcoming. This iron-safe clause is a reasonable stipulation in the contract, fair alike to the insured as well as to the insurer, and, if a loss by fire occurs and the insured is unable to show, at least, a substantial compliance with the requirements of his contract, he has no just cause to complain of his inability to reap its intended benefits. [Brand Distributors, Inc. v. Insurance Co. of North America, 532 F.2d 352 (4th Cir. 1976)]
Many first party property policies, and almost all inland marine policies, contain a records clause or warranty that requires the insured to maintain sufficient records to prove the amount of his or her loss. All records clauses are called “iron safe clauses” because they originally required that the records be locked in a “fireproof iron safe.” The requirement for an iron safe is disappearing because of the ability to store records electronically off site. A common form of iron safe clause will provide: