Sometimes the lines between a property or liability claim can be blurry. For homeowners and business owners alike, determining what type of claim to file or identifying which policies will respond to a given occurrence can be confusing. Below, please find Beckerman & Co’s cheat sheet for determining if a policyholder is dealing with property or liability insurance.
The first helpful tip to remember is that property policies cover the actual property of the policyholder. The type of property that is listed in the declaration page is what will be covered for the policyholder. Personal home property coverages cover the structure of a home, jewelry, sump pump overflow, if the endorsement is purchased, etc. When a covered loss causes damage to the actual property, property insurance and claims process will kick in.
For Business Owners, property coverage can include limits for the actual building the business resides in, a separate limit for business personal property and will also include limits for such various coverages including “salesman samples”, “spoilage” and equipment breakdown. This means if a covered loss destroyed salesman samples, if refrigeration equipment fails and all the product it contained perished, or if equipment was rendered unusable because of a covered loss, various property coverages would kick in.
While property coverage insures actual property, liability risks and claims are based on responsibility. Who is responsible for the damage that occurred? When a guest falls in one’s home, was the host responsible for the fall by being negligent? When, in the course of operations, an employee causes damage to client’s property at a job site, how is the business held accountable for the damage? Liability risks and claims are a little abstract because they don’t deal with actual tangible property, but instead answer, “who can be blamed for this?””
Specifically it can get confusing when liability is being determined for property damage. In the case above with the workers, the insurance that will respond to this will be the business’ general liability insurance. It certainly won’t be the business’s property policy. Property policies only cover the actual property owned by the policyholder. Since the property damage occurred to someone else’s property, and the business was responsible for the damage, i.e liable for the damage, it is the business’s general liability policy that will respond. The Beckerman article, Hidden Coverages discusses an example of this for personal insurance. If a policy holding family goes to a restaurant to eat, and for some reason, causes damage to the restaurant, the family will be held liable. As such, this would be handled as a liability claim against their homeowners insurance.
In short there are several questions one can ask themselves to determine if he or she is dealing with a property or liability situation. First, was there damage done to actual property? If yes, the next question is, is this property that I own, for which I have insurance? If yes, then he or she is dealing with a property claim. If the answer is no, the next questions should be, does someone else own this property and did I cause the damage to it? If the answers to these questions are yes, then he or she is dealing with a liability issue. Always remember property is tangibility and liability is responsibility.
Still have questions about determining property and liability risks? Contact Beckerman & Co, where an experienced insurance manager will walk you through the basics.