There are many businesses who repair or service property of a customer or that that is owned by another party.
Should this property be damaged or destroyed, there may be obligations under an agreement or contracts to repair or replace it. Even if no written contract is in place, the business in possession of the property may be held liable from a lawsuit. With this in mind, any businesses that holds property of others should make sure that their insurance is properly endorsed.
Commercial Property Policies
Commonly, commercial property policies, including standard ISO policies, will contain language to provide some coverage for property of others in your care custody or control. However, it should be noted that only personal property is covered, with no coverage being afforded to real property (buildings) owned by anyone other than the named insured.
Below are some explanations on how and when non-owned property is addressed under a standard ISO property policy. It should be noted that, most property policies drafted by preferred carriers will provide coverage that is either equivalent to, or broader than, the ISO form.
There are two categories of coverage pertaining to property owned by a third party. Property of Others, which accounts for non-leased personal property owned by someone else. However, this category also pertains to leased property you are not obligated to insure. The second would be Leased Personal Property. This focuses on property a named insured had leased and holds a requirement to insure under the language of the lease.
Leased Personal Property
For leased property, your company may lease equipment to use in day-to-day operations. Common examples include, tools or large pieces of machinery, copy machines, and office furniture. In some cases, the property owner may require you to insure the property against physical loss or damage.
For instance, if you were to lease a copy machine for your office. You would be responsible under the terms of the lease for any loss or damage the copier sustained. The lease would also require that you insure the machine under an "all-risk property policy" for replacement value.
Contractual obligations placed upon you by a lease are automatically covered as Your Business Personal Property. It is covered up to the limit you have chosen for your BPP. For example, if you have chosen 500,000, then that limit would apply to both your owned BPP as well as property leased for which you are contractually obligated to insure.
It is important to always read your lease carefully as you may be obligated to accept responsibility for damage to the equipment that may not be covered by your policy. Common language to be aware of is responsibility for loss or damage "by any and every cause whatsoever."
Property of Others
The other major category that ISO property policies cover for non-owned property, is Property of Others. This category includes both of the following:
- Property you lease but aren't required to insure. for instance, many companies lease office furniture. However sometimes you will find that the leases do not require you to insure.
- Property belonging to a third party but isn't subject to a lease. An example is borrowing a projector from the business next door.
Property of Others is dissimilar to leased Property in that it is not covered under personal property you own. Instead, Property of Others falls under its own category of Covered Property. It will only be covered by the selected limit specifically listed on the policy. If a limit is not present, then the policy provides little to no coverage for Property of Others. And unlike leased property, Property of Others is paid on an actual cash value basis, even if you have purchased replacement coverage for your own Business Personal Property. Should you wish, an endorsement can be purchased for replacement cost coverage however for an additional premium.
Property of others can be an often-overlooked consideration when discussing the needed limits with your agent. Depending on the nature of your business, having care custody and control of other's goods can be a core component of doing business. It is not uncommon for some types of business to have more exposure for property of others than for their own owned personal property. Make sure you are having this conversation with your insurance representative and are taking the proper steps to insure both your owned property as well as your property of others.
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