Many of our clients come to our doors with perplexed looks on their faces and denial letters in their hands. Dizzied after a long battle with their carriers, which our clients seemed to have lost to purported words in their policies that they are presumed to have bargained for, they come to us for understanding and hoping that the policy they purchased is not a pamphlet full of meaningless words.
At our firm, we subscribe to the FC&S Bulletins, published by the National Underwriter Company, among many other reliable coverage resources, to help our clients make sense of it all. The following bulletin made me think of the many times we have turned a “No” into a “Yes,” especially in the “loss or damage” debate in business interruption claims, as discussed in Does an Insurance Policy Cover only “Loss” or “Damage” to Property? and The "Loss" or "Damage" Coverage Requirements – A Business Interruption Afterword – Understanding Business Interruption Claims, Part 31.
Theft and Loss of Business Income
Our insured, a jeweler, has a business owners policy (BOP), ISO form BP 00 02, which excludes merchandise for sale. A jeweler’s block policy covers the merchandise. The BOP provides for business income coverage when the building or personal property is damaged as a result of an insured peril.
During an armed robbery the gunman fired a shot into the floor damaging the carpet and floor. Of course, that did not cause the interruption; the thief took all the merchandise, which did cause the interruption.
The company says the damage must cause the interruption, and since merchandise is excluded, there is no coverage. They said "as the property damage to carpeting and floor does not cause an interruption of business or the untenantability of your premises, there is no coverage for loss of income."
This might be the intent of the people who wrote this form, but it does not say that. It says only that coverage is triggered when there is damage.
Who is right?
South Carolina Subscriber
The BOP business income coverage applies to the actual loss of business income that is due to the necessary suspension of the insured’s operations during the period of restoration. The suspension "must be caused by direct physical loss of or damage to property at the described premises."
Note that the damaged property does not have to be "insured" by the BOP; it only has to be located at the premises described in the policy and damaged by any BOP peril.
There need only be damage to any property at the insured location. The most common occurrence of this kind involves a tenant whose business is closed when the landlord’s building is damaged by fire. Even though there is no damage to the tenant’s own property that is insured by the BOP, there has been damage to property by a covered business-owners peril (fire); the business-owners policy covers the tenant’s loss of income during the closing.
In the case cited, the theft of the jewelry is a loss to personal property at the premises as a direct result of an insured peril (theft). The fact that the jewelry is not insured by the BOP does not matter. In addition, the damage to the carpet and floor by the gun shot also is sufficient to trigger coverage under the present wording.
Never give up…