Commercial Property Insurance

Is theft covered under commercial property insurance?

As we already indicated, theft is covered under commercial property insurance. The contents of your business are included in the policy. But, there is an important exception to this coverage that every business owner needs to understand.

Your business contents are covered under your commercial property policy as long as they are on your property at the time of theft. However, once you take any equipment or business contents off your business property—specifically farther than 100 feet from the location listed on the policy—the items are no longer insured.

Once your business property leaves the premises of the property it no longer exists as “business personal property” but becomes redefined as “inland marine,” and must be covered under a separate inland marine policy. In order to cover your business contents off the premises of your business you need to make sure that “inland marine” is a part of your commercial property insurance policy.

I know this seems like a strange name and if your business has nothing to do with the water, it can seem out of place in our discussion. But “inland marine” is the insurance term given to any business contents that have been removed from the physical business property itself.

Inland marine insurance was originally created to protect products as they were shipped overseas. But, today, these insurance policies cover any goods or contents that are considered “in transit” over water or land, and even, in some cases, those that aren’t in actual transit at all.

This coverage includes anything that needs to move from one site to the other, or from your business to your home or to offsite meetings—such as laptops or tablets, cameras, lenses and video equipment, tools and machines, rare art or furnishings, or anything else that your business transports.

If you have teams or crews that take computers, tools, equipment, or merchandise with them to other job sites, these would all fall under the category of “inland marine.” They are only covered for theft or damage if you have an inland marine policy or clause in your property policy. Remember that once the business contents are “in transit,” or off your property, they are automatically redefined and can no longer be covered as business personal property.

Sometimes insurance companies will set up a “give back” feature where they exclude something and then offer a portion of minimum coverage instead. It’s not unheard of for some insurance companies, for instance, to exclude inland marine coverage on a standard commercial property policy but then give you up to $10,000 of business personal property coverage anyway.

This is mostly done to try to prevent lawsuits from happening and cover businesses in the case of a minor loss. But for the most part, as soon as you take your equipment or property contents off the business property, it is technically “inland marine” and requires its own policy.

Unfortunately, the person who wrote his original commercial property policy did not think about the nature of his business. The theft was not covered under his commercial property policy because at the time it was stolen, the equipment was more than 100 feet away from his place of business and he didn’t have inland marine coverage.

Even though, as a landscaper, his business is everywhere, and he is always taking his equipment everywhere, the policy was written based upon the business address.

In all practicality, his “office” is all over town. He works in neighborhoods, and parks, and business complexes in every area of the Phoenix valley. It’s fair to say that his equipment is rarely, if ever, at his actual physical business address.

But the commercial property policy doesn’t recognize by itself the mobile nature of his business. It insures only that one place. The failure was in the previous agent who didn’t ask the right questions or understand what the landscaper really needed his commercial property insurance to do for him.

When you go to acquire your commercial property insurance make sure you choose an agent who will ask good questions, understand your situation, and get you the right coverage for all the activities of your business.

Remember, commercial property insurance covers only specific premises. If you take something away, even for work purposes, it’s out of its “normal use” and no longer covered.

In one other case, I have a client who has a business doing interior design. She always has lots of materials, furnishings, and art pieces that she uses to stage, decorate, and stock the spaces that she is designing. She buys the items and owns them until the jobs are complete, and then the design work and furnishings are sold to her clients.

A few years ago, before she came to me for commercial insurance, she moved a $20,000 painting away from her business premises to use on one of her jobs. Somehow the painting got destroyed before the job was complete. Her insurance company wouldn’t cover it because it was “in transit” and no longer defined as “business personal property” and she was stuck with the loss.

In this area of insurance, and in so many others, it can make a huge difference to have the right coverage when you need it. You are depending on your business to provide for you, your employees and your customers. It’s important that you understand all the definitions, coverages, and limits of a commercial property policy.

This knowledge comes through educating yourself and it should also come through the thorough work, assessment, and attention to detail of a good insurance broker.

By understanding the strict definition of “business personal property” my two new clients might have had a better chance of having adequate coverage at the time of their losses. But what is even more apparent, is that if the right questions were asked by their insurance companies at the time they bought their policies, both of my clients would have been safeguarded from theft and the damage they suffered.

Because their agents did not pay attention to the nature of their work and their true property insurance needs, even thought they had policies, it was like having no insurance at all.

When you go to get insurance for either your personal needs or for your business, your agent or broker needs to be asking the right questions to make sure you are adequately covered. In the case of commercial insurance, they need to know:

• What is the nature of your business?
• How much time do you spend offsite?
• What equipment do you use away from your business premises?
• What do you see as the biggest risks to your business property?
• Are those risks concentrated onsite or off?