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


...listed three categories of property: (1) Building (2) Your Business Personal Property and (3) Personal Property of Others, but the only one for which a limit was shown was the first one, which had a limit of $25,000. The court therefore held that with no limit shown for personal property of others coverage, the marina’s insurer had no obligation to pay for the boat’s damage.

If, for some reason, a declaration of coverage for personal property of others in the named insured’s care, custody or control is omitted, an automatic limit of $2,500 applies. If that amount is determined to be insufficient, it is likely to generate a dispute.

Unlike leased personal property of others, the coverage for non-leased personal property of others applies on an actual cash value basis, even though the named insured’s personal property may be covered on a replacement cost basis. In light of a recent change to the BPP Coverage Form, however, replacement cost can be extended to personal property of others, provided the policy Declarations reflect that this extension is applicable.

A limitation, however, still applies. If an item of personal property of others is subject to a written contract which governs the named insured’s liability, the valuation of that property will be based on the amount for which the named insured is liable under the contract. This amount, however, cannot exceed the lesser of the replacement cost or the applicable limit of insurance.

Like leased personal property, loss or damage to personal property of others is paid for by the insurer directly to the owner of such property or to the one who has legal title to it.

Location of Covered Personal Property of Others

One of the disadvantages of property insurance versus inland marine is that for purposes of business personal property — not necessarily limited to personal property of others — coverage is largely limited to fixed locations at described premises. This is not to say that no coverage applies to such property while off-premises, because some coverage does apply, but the amount is limited to $10,000, at least under the ISO BPP Coverage Form.

Insofar as business personal property is concerned, whether it belongs to the named insured or is property of others in the named insured’s care, custody or control, and whether leased or not, coverage is limited to the property (1) located in or on the building or structure described in the Declarations or in the open (or in a vehicle) within 100 feet of the building or structure or within 100 feet of the premises described in the Declarations, whichever distance is greater. Some independently filed property policies will cover the named insured’s own business personal property to within 1,000 feet of the described premises but limit the personal property of others to within 100 feet.

This 100-foot distance can be confusing. If the described premises were to be shown on the policy as a suite or office number, it would be a mistake to assume that the 100 feet extend from the edge of the building outward in any direction 100 feet, or 100 feet from the boundary of the described premises. The measurement actually will be from the office or suite shown in the policy Declarations.