Our insured, a jeweler, has a businessowners policy (BOP), ISO form BP 00 02, which excludes merchandise for sale. A jewelers block policy covers the merchandise. The BOP provides for business income coverage when the building or personal property is damaged as a result of an insured peril.

During an armed robbery the gunman fired a shot into the floor damaging the carpet and floor. Of course, that did not cause the interruption; the thief took all the merchandise, which did cause the interruption.

The company says the damage must cause the interruption, and since merchandise is excluded, there is no coverage. They said "as the property damage to carpeting and floor does not cause an interruption of business or the untenantability of your premises, there is no coverage for loss of income."

This might be the intent of the people who wrote this form, but it does not say that. It says only that coverage is triggered when there is damage.

Who is right?

South Carolina Subscriber

The BOP business income coverage applies to the actual loss of business income that is due to the necessary suspension of the insured's operations during the period of restoration. The suspension "must be caused by direct physical loss of or damage to property at the described premises." 

Note that the damaged property does not have to be "insured" by the BOP; it only has to be located at the premises described in the policy and damaged by any BOP peril.

There need only be damage to any property at the insured location. The most common occurrence of this kind involves a tenant whose business is closed when the landlord's building is damaged by fire. Even though there is no damage to the tenant's own property that is insured by the BOP, there has been damage to property by a covered businessowners peril (fire); the businessowners policy covers the tenant's loss of income during the closing.

In the case cited, the theft of the jewelry is a loss to personal property at the premises as a direct result of an insured peril (theft). The fact that the jewelry is not insured by the BOP does not matter. In addition, the damage to the carpet and floor by the gun shot also is sufficient to trigger coverage under the present wording.