Under many commercial insurance policies, theft damage caused by breaking and entering is covered, but any other loss or damage resulting from or caused by that theft is not. (Photo: iStock)
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Question: Coverage is provided under a CP 00 10 10 91, Basic cause of loss form. The loss date is Dec. 30, 2017, and the loss was reported on Feb. 20, 2018.
The loss notice says vandalism, copper cut from heating / air unit. The police report describes loss as a burglary. Copper was cut from the unit, and the unit fell flat to the ground.
The adjuster's report says the outside air conditioning unit was destroyed when an unknown person or persons took copper lines from inside the unit; no break-in retail store or damage to BPP. A denial letter was issued. Now , the retail agent and insured are contesting the denial.
What are your thoughts? Was the denial warranted?
— Puerto Rico Subscriber
Answer: The CP 10 10 10 91 Basic Causes of Loss form, Exclusion No. 8. clearly excludes loss or damage from vandalism and theft, except for building damage caused by the breaking in or exiting of burglars.
The theft of the copper lines was not caused by the breaking in or exiting of burglars. Therefore, the loss is excluded.
Thieves come for copper pipes
Question: Coverage is provided under a DP-1 12/02 on a risk located in Georgia. Unknown people broke a lock and gained access to the crawlspace under the insured risk. They stole copper electric wires and copper Freon lines.
The DP-1 is a named peril form with no coverage for theft. It does provide coverage under VMM for the "damage to the building covered caused by burglars."
The insured interprets this to mean all costs except materials to replace the stolen copper. This includes labor and things such as wire clips and receptacles, as they were damaged when the thieves ripped the copper wire out.
The AC was also damaged when the copper Freon lines were taken. The insured has submitted to have the system repaired and recharged. He expects coverage on all costs except the material cost for the copper Freon line.
Does the DP-1 provide coverage for building damage caused by burglars breaking in and then exiting or does it extend to all building damage caused during the course of the burglary and the theft?
— Florida Subscriber
Answer: The policy has no exceptions to the coverage provided to the building caused by burglars. Therefore, any damage to the building or parts of the building is covered.
The only thing you need to pay attention to is that damage to personal property is not covered.
So for example, if in ripping out the copper pipes the burglars knocked over and broke the TV, there is no coverage for the TV but there is coverage for the hole in the wall where they ripped out the pipes.
In your case, it sounds like everything the damage was part of the building and should be covered — except for the copper lines themselves.
Can copper theft be claimed as vandalism?
Question: An unknown person stole the copper and major components from our policyholder's air conditioning unit. He filed a claim for vandalism. However, Exclusion J in the policy form excludes loss or damage from vandalism and theft, except for building damage caused by the breaking in or exiting of burglars.
Some adjusters feel we should allow for the components damaged as a result of the theft, even though we do not allow for the theft. We would like your input in this, per the policy language, as it appears no damages that resulted from the theft would be covered either.
— North Carolina Subscriber
Answer: The loss would not be considered vandalism. Webster's defines vandalism as, "Willful or malicious destruction or defacement of public or private property."
It doesn't appear that the theft was a malicious act of destruction, but a theft of copper.
However, any damage done to the building in the process of the theft of the copper and air conditioning components would be covered. The air conditioning units could be considered part of the building.
Related: 3 challenges with property claims
Effect of vacancy clause on theft claim
Question: Our insured owns a large freestanding office/warehouse building.
The tenant vacated the property in July 2012. The insured's property form contains vacancy clause conditions. A theft of copper wiring took place, and the carrier invoked the "vacant for more than 60 consecutive days" clause to deny the coverage, stating that the building lacked sufficient business personal property to conduct customary operations.
The insured contended that the office portion of the building contains enough business personal property to conduct customary operations of an office and represents more than 31% of the total square footage. The insured's position is that the customary operation of the risk is now a furnished office building and warehouse for lease.
The second issue is there is no record of when the loss occurred — it may very well have taken place within the required 60-day period. The loss was recently discovered by a real estate broker showing the property.
— California Subscriber
Answer: Whether the office contained enough business personal property to conduct customary operations could be a question of fact. It seems that having the property furnished as an office building/warehouse for lease would not be considered customary operations. It is just a building with no operations waiting for a tenant, as the building owner's intent likely would not be to maintain unrented buildings as its customary operations.
The insured would need to show that the building was not vacant for more than 60 days when the loss occurred. This may be difficult to do, but if the loss was just recently reported, and the tenant vacated the property in July 2012, it seems reasonable to assume that the theft occurred when no one was using the building and there was no one on site to report it. It could have occurred within 60 days after the tenant vacated, but the insured would have to prove that. It would be difficult to show that the theft occurred within the 60 day window if someone was not regularly checking in on the building.
The type of theft may determine the coverage
Question: Our insured suffered a theft of copper piping and water heaters. There was extensive damage done to the building during the theft. Damage done during the burglar's exiting and entrance was not severe. The policy has a theft exclusion, CP 10 33 06 95
The carrier is not willing to pay for the damage. Is this consistently the way this coverage is handled?
— Connecticut Subscriber
Answer: According to the CP 10 33 06 95 endorsement, theft damage caused by breaking in and exiting is covered; any other loss or damage resulting from or caused by theft is not. The carrier would have to pay for the damage done by the breaking in or exiting of burglars, but not for any other theft-related damage. Therefore, yes, this is the normal application of coverage for this type of loss.
The trouble with vacancy clauses
Question: Our insured, a manufacturing company, moved from one building location but continued to work in the shop and do some construction work at the old location until the end of December.
The employees were in and out of the old location through most of December. They used the forklifts that were stored inside the building to load structural steel that had been built for the jobsite throughout that timeframe. They did not use the offices and did only minor shop work, mostly loading and unloading. There were also crews in the building in December continuing to move items out of the building and do minor facility maintenance and cleaning. The building was vacant during the next month, January. A theft of copper was not discovered until February 1.
The adjuster issued a reservation of rights due to the policy's vacancy clause, referring to the portion of the clause that states, "Such building is vacant when it does not contain enough business personal property to conduct customary operations." Our client worked in the building through December. Would you agree that the forklifts and structural steel in the building in December would qualify as enough personal property to conduct customary operations?
— Texas Subscriber
Answer: If the insured owns the building, the standard on the ISO CP 00 10 is that at least 31% of the building must be used to conduct customary operations. If the insured is a tenant, then the building must contain enough business personal property to conduct customary operations. We cannot determine what the insured's customary operations are; that is a question of fact and not of coverage. While the company was conducting business, was it what they ordinarily conducted there, or were they essentially just moving prebuilt materials to a jobsite? If the company normally did more than that at that location, it does not sound like customary operations were being performed.
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