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Work-From-Home Arrangements May Create Coverage Gaps

By: Bill Wilson


I was reading a Carrier Management article today about how likely work-from-home arrangements that have proliferated during the COVID-19 pandemic are to continue in the future. This can create potential coverage gaps under both commercial and personal lines and likely necessitates the need to revisit traditional policy coverages to revise them to reflect this new reality or at least provide coverage options.


I wrote about some of the commercial lines implications in this article:


Has the Pandemic Created Coverage Gaps You Haven’t Thought Of?


I also addressed some of the personal lines issues in this article:


Potential Adverse Implications of the Coronavirus on Personal Lines Coverages


This article adds a little more specificity to the commercial lines side. A couple of days ago, I received an email from an agent who had the following claim denial.


A commercial insured had some inventory held for sale (not sales samples) that was in the possession of one of their sales reps. The inventory was damaged by a covered peril. The adjuster denied the claim under the ISO CP 00 10 Building and Personal Property Coverage Form because of this policy language:


Property Off-premises You may extend the insurance provided by this Coverage Form to apply to your Covered Property while it is away from the described premises, if it is…Temporarily at a location you do not own, lease or operate….


The basis for the denial was that the property was not “temporarily” away from the described premises. There was no intention of ever returning the property held for sale to the described location. That might happen, but that was not the plan. I tend to agree with the adjuster that, for all practical purposes, this property is permanently away from the described premises.


Returning to the remote working arrangements expressed in the Carrier Management article, business property at homes or other locations other than described locations may become the new normal to significant extent. A comparable situation came up a couple of months ago with an office that had 30 people working from home due to the pandemic.


That policy, like the one above, had only $10,000 of coverage for business personal property temporarily away from the premises which was likely insufficient to cover the amount of property in the possession of 30 people. Perhaps even more important, if this arrangement was to become permanent, the instant that decision is made, the new coverage limit becomes $0.


So, what should be done. Interestingly, when I took a look at the current ISO BOP policy, it had the following provision:


Personal Property Off-premises You may extend the insurance provided by this policy to apply to your Covered Property…while it is in the course of transit or at a premises you do not own, lease or operate.


The limit is still $10,000 but note that there is no mention of this being a temporary circumstance. This form provides superior coverage during the transition from temporary to permanent but the limit may be inadequate. In addition, there is a huge variation from one insurer to another in what their BOP policies cover and for how much.


Many property policies, with minor exceptions, only cover business personal property on a described location. When home working is extensive, it is not practical to describe every location. This indicates a need for some sort of blanket coverage with optional limits in the policy form or an endorsement. It also requires us to revisit the business limitations and exclusions found in personal lines policies.


This is indicative of the types of insurance coverage issues that need to be addressed in the so-called “new normal.” Let’s get busy.



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About Bill Wilson:

Bill Wilson is one of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America.

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