Business Personal Property of Others: Insuring It Properly Involves Many Considerations

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Even though the name of this coverage form connotes liability insurance, it actually is categorized as a property form because of its mechanics.

...were words of “inclusion” in the policy and terms of inclusion must be broadly read in favor of coverage. FSI also pointed to an e-mail exchange between its insurance agent and the insurer’s underwriter. FSI contended that if these e-mails were admissible, they would show that coverage for cargo or contents of the containers was contemplated. For legal reasons, the e-mails were not admitted as evidence.

The court stated that because the term “open” was not defined in the policy, it must be given its ordinary meaning. Turning to the Merriam-Webster Dictionary, the court found the term “open” in relevant parts as meaning, “having no enclosing or confining barrier; accessible on all or nearly all sides” and as “completely free from concealment; exposed to general view or knowledge.”

When the phrase “in the open” is applied to the undisputed facts in this case, the court explained, it was readily apparent that the policy provided no coverage, duty to defend, or indemnification for this particular loss. FSI admitted that the stolen cargo was locked inside a large intermodal shipping container, which was locked, sealed and weather-tight. Thus, the court said, the goods were contained in an “enclosing or confining barrier” and inaccessible “on all sides.” Further, the court added, the goods were completely sealed and not exposed to general view or knowledge.

Interestingly, when the court reviewed FSI’s prior policy written with a different insurance agent, it revealed that coverage was provided for cargo contained in the stored containers for more value and premium. It was undisputed that despite the insurance agent’s request for a copy of FSI’s prior policy, the former agent did not provide that policy to the current insurance agent. As a result, the policy as issued provided less coverage than the one that it replaced.

There are advantages and disadvantages to relying on current insurance policies that are to be replaced. The disadvantage is that if the coverage is inferior for some reason, the coverage may remain that way if the insurance agent does nothing more than have the new policy issued based on the replacement policy’s terms and conditions, which is often done. An advantage to reviewing the replaced policy, to the extent that the provisions are analyzed, is that it may give the newly appointed insurance agent the opportunity to consider coverages and exposures that have not otherwise been considered in preparing issuance of the replacement policy.

Summary

If business personal property of others is to be covered under a commercial property policy, one needs to keep in mind the following: Leased personal property of the one who is to retain possession of that property on a temporary basis, subject to a written contract also requiring certain insurance, is handled differently than non-leased personal property.

Leased personal property is considered to be part of the “Your business personal property” coverage and, therefore, subject to the named insured’s selection of the insured amount, causes of loss, and co-insurance percentage. The value of non- leased business personal property, on the other hand, needs to be declared in the policy, along with its value, the kind of covered causes of loss, the applicable co-insurance percentage, and a...


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