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Off-Premises Property Insurance: Who’s Liable in the Event of a Loss?

An insured installs and services bank equipment, including ATMs, which are stored at warehouses. The carrier says the warehouse is responsible for the property while it's being stored, and won't provide any coverage to the insured.
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An insured installs and services bank equipment, such as ATMs. The equipment is temporarily stored at riggers' warehouses until it can be installed. There are three different riggers all located in different states. One rigger says it provides coverage on the equipment while it's stored there—although I don't know what type of coverages they are providing—and one says it provides coverage if it's legally liable, but not for "acts of God," and recommends the insured has coverage for the stored equipment. 

The carrier that writes our insured's package policy says the warehouse is responsible for the insured's property while it's in its care, custody or control, and is hesitant to provide any coverage. There is no contract between our insured and the riggers that states who is responsible for what, so there seems to be a gap in coverage.

Q: Does coverage for property stored at a warehouse fall under the warehouse policy? What if the property catches fire and the warehouse policy doesn't respond? What is an appropriate coverage for the insured to purchase?

Response 1: Your client should insure their property at all locations, including in transit and installation, using the broadest open perils form you can find. If the storage facilities also provide coverage, get certificates of insurance and use them to press for premium credits on your insured's policy. A contract that makes the storage contractor responsible for damage would be a good risk management device and might also help to lower the premium for your client. 

Above all, your client should not rely on others to insure their property. No matter how carefully you draft insurance requirements and monitor renewals, it's impossible to be sure that the other party will have coverage when a loss occurs. There are dozens of reasons why, but they're the same as any other attempt to make others responsible for your client's coverage: It might not work.

Response 2: Does the insured own the ATMs or are they owned by the banks and in the insured's care, custody and control? If they are owned by the insured, does the property policy in place provide off-premises property coverage as is found in the ISO form? Maybe an inland marine policy would be the answer.

Response 3: The riggers may have warehouse legal liability, but absent proof of that, as well as how the risk is handled via a contract or warehouse receipt, coverage for the ATMs should remain with the owner and its insurer. Your customer can sort out what other insurance is available at the time of loss, but I would not recommend relying on vague promises of responsibility or coverage. 

Response 4: Your client should insure their own risks, including the ATMs stored in the warehouses. I have seen warehouse contracts that only provide coverage for the property of others if the damage is caused by the negligence of the warehouse operator. Even then, the amount payable might be an amount per pound of weight, which would leave the client woefully uninsured. 

Also, the contracts often state the customer is responsible for their own goods with a waiver of subrogation in favor of the warehouse. If your client's insurer will not provide the needed coverage, move the account or arrange a separate floater policy for those goods in the warehouse and while in transit.

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.

This article is intended for general informational purposes only, and any opinions expressed are solely those of the author(s). The article is provided “as is" with no warranties or representations of any kind, and any liability is disclaimed that is in any way connected to reliance on or use of the information contained therein. The article is not intended to constitute and should not be considered legal or other professional advice, nor shall it serve as a substitute for obtaining such advice. If specific expert advice is required or desired, the services of an appropriate, competent professional, such as an attorney or accountant, should be sought.

Thursday, May 12, 2022
Commercial Lines