What About Gift Cards?

What About Gift Cards?

Gift cards have become an increasingly popular form of giving for holidays, birthdays and other occasions. Each year, billions of dollars are spent on gift cards, many of which are never redeemed. If a gift card is lost or stolen, is there any coverage for the lost value under a homeowners policy?

Since gift cards were not specifically mentioned in the ISO HO 1991 edition, there is some confusion between coverage for gift cards vs. credit cards. Are gift cards comparable to cash and covered for $200 or are they more analogous to credit cards, which are covered for $500 with no deductible? While most authorities assume that gift cards should be treated as cash, the HO-91 edition policy provided no specific guidance on that point.

Although gift cards have been around for years, it wasn’t until the HO 2000 edition that ISO included language addressing how the policy covers them, referring to them as “stored value cards” and covering them, like cash, for just $200.

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Insuring Property Under a Triple Net Lease

Often leases will require a tenant to insure part of a building such as plate glass or HVAC equipment. In one claim, the tenant insured business personal property under a CP 00 10 and tried to make a claim for damage to plate glass caused by a pellet gun. The adjuster correctly denied the claim and the agent asked how the real property could have been covered.

The most often overlooked way to cover property a tenant is responsible for insuring in a triple net type lease is to use the CP 00 10, which is already covering business personal property. Simply determine the RC value of the glass and/or any other property the tenant is required to insure, and then describe it with that limit of insurance under Coverage A.

Many people mistakenly assume that Coverage A can be written only on entire buildings or distinct structures, particularly with regard to meeting coinsurance requirements. The coinsurance provision applies to “covered property,” which is whatever you describe on the property declarations page.

For more information on this and the danger of triple net leases, click here.

HO Coverage for Stolen Cell Phone Charges

What happens if your cell phone is stolen and hundreds of dollars of charges are placed on the phone? Does your HO-3 homeowners policy cover this? What about an HO-5 form?

For personal property, the policy says, “We insure for direct physical loss to the property described in Coverage C caused by any of the following perils unless the loss is excluded in Section I — Exclusions.” The theft of the phone is a direct physical loss of property, but its subsequent use is not. The HO-5 form doesn’t help since it only broadens the perils. The problem is not with the perils, but the fact that consequential (indirect) losses aren’t covered.

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Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.