(June 2016)

A. COVERAGE

The coverage form obligates the insurance company to pay for direct physical loss or damage to certain types of property. The property must be at a location listed or described on the declarations. However, this is not open-ended coverage. The loss or damage must be caused by a cause of loss described in the causes of loss form attached to the policy in order for coverage to apply.

Related Article: Basic, Broad, and Special Causes of Loss Forms Analysis

Coverage applies to only loss or damage that occurs at a definite place and time. There is no coverage for a loss event that is not tangible or that is not capable of being measured.

The reference to premises means that coverage applies to only property located in or on the premises listed or described on the declarations. This is why the declarations is a very important document. Coverage does not apply if the location and type of property is not properly listed or described.

5. Coverage Extensions

There are several coverage extensions that apply to covered property if 80% or higher coinsurance applies, or if coverage is written on a reporting basis. They are limited to protecting property located in or on buildings listed on the declarations. They also protect property in the open or in or on vehicles but only when the property is within 100 feet of the described premises.

Note: The 10 12 edition changes to the building, business personal property and personal property of others were not added to this opening paragraph so the definition of property in the open or in a vehicle is slightly different.

Any exceptions to the opening paragraph requirements are stated in the specific coverage extension.

Each extension provides additional limits of insurance. None of them is subject to the coinsurance condition.

a. Newly Acquired or Constructed Property

Because contacting an insurance agent to report a new acquisition is not automatic behavior, this extension gives the named insured some peace of mind coverage for new purchases. However, this coverage is not free. The property acquired must be reported and an additional premium paid starting from the date it was acquired.

• Buildings

If building coverage is provided, this extension applies to new buildings the insured owns and that are being constructed at a premises described on the declarations. Buildings the insured purchases at other premises are also covered but only if they are intended for use similar to other scheduled buildings or as a warehouse. The maximum limit for any newly built or purchased building is $250,000.

Note: As stated above, the newly purchased building's use must be similar to that of existing buildings or be used as a warehouse. The insurance company accepts risks based on occupancy and should not be expected to automatically add a new location with a dramatically different occupancy than what it already covers.

The occupancy limitation does not apply to buildings being constructed at a premises already listed on the declarations.

• Your Business Personal Property

If coverage on the named insured’s business personal property is provided, this extension applies to any and all the following:

• Business personal property (newly acquired or existing) at newly acquired locations. Property at fairs, trade shows, or exhibitions is not covered.
• Business personal property (newly acquired or existing) in newly constructed or acquired buildings at locations already listed on the declarations

Note: Unlike the requirement under newly acquired building, there is no requirement that newly acquired business personal property be the same as or similar to existing business personal property. However, it must qualify as eligible business personal property.

Note: The 10 12 edition no longer automatically provides coverage on newly acquired business personal property at a described location. This could be a significant reduction of coverage for businesses that have rapid and constant turnover of stock. (10 12 coverage removal)

The maximum limit per building is $100,000.

• This coverage extension does not apply to certain types of personal property of others that are in the named insured's custody on a temporary basis. If the reason the personal property is with the named insured is because the insured is installing or performing work on it, there is not coverage under this extension. In addition, if the personal property is part of the named insured’s wholesaling or manufacturing activities there is no coverage under this extension.
• Period of Coverage

Coverage is provided on a very limited time frame. It ends on whichever of the following is earliest:

• The policy expires
• 30 days after the property is acquired (or construction on it begins)
• The date the property or value is reported to the insurance company

Note: This provision is occasionally applied with unfortunate and undesirable results.

This is especially important for the insured that requests that the 30-day time period be increased to 180 days. Even then, coverage still ends on the earliest of the above dates.

The construction date is the date the insured begins constructing a new building. Because covered property does not usually cover foundations, the 30-day limitation does not begin until construction above grade level begins.

The date that building and/or personal property was acquired is reported to the insurance company so that premium can be charged for the entire period it was covered. This extension is provided for the insured's convenience but coverage requires a premium charge. It is better to owe premium than to have an uninsured loss.

Related Court Case: Newly Acquired Property Held Not Covered After the Automatic 90 Day Period Expired

d. Property Off-Premises

Most business personal property tends to move around. This extension recognizes this fact and provides up to $10,000 as the property does so. However, this coverage applies only to property usually situated at a described location that is away from the premises for a short period. The personal property can be temporarily:

• At a location the named insured does not own, lease, or operate
• At a storage location the named insured leases but only if the lease was made after the policy period began
• At a fair, trade show, or exhibition

If storage space leased during the policy period is still leased when the policy renews, it must be added to the policy as a separate covered location. Otherwise, coverage at that leased storage space ends.

This extension has two important limitations. It does not apply to property in or on a vehicle. It also does not apply to property in the possession of the named insured’s salespersons, unless the property and the salespersons are at a fair, trade show, or exhibition.

Inland marine coverage forms are available to cover off premises property, property in transit, or property at the premises of others for storage, service, or repair.

Related Article: Who Needs Inland Marine Coverage?