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


If one ponders the types of businesses involved in bailments, such as for leasing, safekeeping, or for performing some kind of cleaning, repairing or servicing of personal property, it is an infinite number.

...bailments will likely be for the mutual benefit of both parties, that is, the bailor receives some benefit from the service of the bailee, and the bailee is thereby compensated by the bailor for the service rendered.

Generally speaking, people involved in the insurance and risk management industries are likely to think in terms of inland marine insurance for purposes of covering property involved in a bailment. The reason this might be a natural inclination is that inland marine insurance is ideally suited to personal property that commonly is moved about. The coverage forms also can be broad in scope with flexible features, including covered causes of loss.

What should not be overlooked, however, is the coverage offered by property insurance policies. There are, of course, caveats in dealing with property insurance, but if they are observed, coverage can be provided that can likely meet the expectations of property owners (bailors) and result in less cost to the bailees than what might otherwise apply to inland marine forms. If nothing else, property policies offer the convenience of automatically covering property of others, subject to some restrictions.

A problem with being precise about insurance on personal property in bailment situations is that the policies are likely to differ. Inland marine policies, for example, can be nonfiled, meaning that their terms and conditions will depend on what the underwriter is willing to provide — and not what a state insurance department permits. While property policies need to be filed with state insurance departments for some kind of approval on a state-by-state basis, these policies, too, can vary because many insurers use their own independently filed policies instead of using the standard forms of the American Association of Insurance Services (AAIS) or the Insurance Services Office (ISO).

For purposes of this article, the provisions of the standard ISO property policy consisting of the Building and Personal Property Coverage Form CP 00 10 10 12 and some other forms mentioned later will be used. In this way, readers can then benchmark what ISO provides against the independently filed forms they may rely on for their own insureds.

Two Classes of Personal Property of Others

The two classes of personal property of others earmarked for certain coverage by the ISO Building...