The commercial business owners policyholder, a restaurant, incurred an early morning break-in. An employee in the back of the restaurant preparing food heard the noise. She went up front and startled the robber, who grabbed the employee's purse and fled the scene. 

Coverage for the restaurant is provided by an ISO BOP 003 07-13. Coverage is extended for personal effects. However, the carrier is denying coverage for the purse and its contents, relying on the verbiage: “This extension does not apply to: (2) Loss or damage by theft." 

I contend this is a robbery and not a theft loss and therefore the exclusion does not apply. The claims manager contends theft includes robbery, citing state statutes, and is standing by the denial. However, since the state statutes apply to criminal acts and not insurance terms, I believe they don't apply. 

Q: Is robbery included in the theft exclusion? 

Response 1: Unfortunately, I have to agree with the adjuster. The ISO BOP says that personal effects of the insured, the insured's employees, and the insured's limited liability company members and managers are covered, for up to $2,500 at each location. However, no coverage applies to loss by theft, and the extension does not apply to tools and equipment used in the insured's business. 

The Commercial Policy 00 10 Building and Personal Property Form has similar language: “Personal effects owned by you, your partners or members, your managers or your employees. This Extension does not apply to loss or damage by theft."

 ISO's crime form defines “robbery" as:

The unlawful taking of property from the care and custody of a person by one who has:

a. Caused or threatened to cause that person bodily harm; or

b. Committed an obviously unlawful act witnessed by that person.

The same form defines theft as “the unlawful taking of property to the deprivation of the Insured." 

Theft is a broader crime definition and encompasses robbery, burglary, larceny and more. The BOP says it will not cover loss to personal effects caused by theft. 

Response 2: Your reasoning is off. “Theft" includes all forms of illegally taking something that belongs to someone else. “Theft" includes robbery, burglary, shoplifting, scam, and the list goes one. Robbery is just one form of theft, so a theft exclusion applies to robbery.

This reminds me of a watercraft claim involving damage caused by a turtle. The boat policy had an “animal" exclusion and the agency customer service representative was trying to say that a turtle is an amphibian, not an animal. All amphibians are animals, but not all animals are amphibians. All robberies are thefts, but not all thefts are robberies. An animal exclusion applies to amphibians. A theft exclusion applies to robberies.

Response 3: I think you're right in that it's the form that governs this decision, not the criminal law in your state. There might very well be case law that sheds more light on the situation, but for that, you'll need to consult an attorney. 

Generally, "robbery" is distinguished from "theft" by violence or a threat of violence on the part of the taker. The fact that the employee surprised the taker does not necessarily mean that she was threatened. She might have been frightened by the presence of an intruder, but that's not the same as a threat of violence on the part of the taker. 

My opinion: The adjuster is justified in refusing the claim, but it's a dumb call. He could just as easily admit that because the employee was frightened, it was a threatening situation from her standpoint and pay this insignificant claim rather than making our industry look like a bunch of cheapskates.

Response 4: Your client is lucky to have an agent that tries to help. However, when a term in a policy is not defined, we resort to the dictionary definition and that definition for "theft" is "unlawful taking," which indeed was what happened. The exclusion therefore applies. The employee can use her homeowners coverage if the loss was over her deductible or the employer can compensate her out of goodwill.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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