Installation Floater and a Dispute over Covered Property

Our question concerns a dispute as to whether wiring installed by our insured, an electrician covered by an installation floater, is covered property. The insured was installing wiring in an apartment building under construction when, unknown to him, the wires in several of the apartment units were cut, perhaps by vandals. The wires were then refastened to the studs so that the cuts were hidden behind the fastening clips. The damage was not discovered until the electricians began their finishing work and the apartments had already been sheet rocked and painted.

The insurer is taking the position that the property that was damaged belonged to the general contractor and not to our insured since it was installed. We believe that the floater language makes the wiring the property of the insured. The floater defines covered property as “materials (including labor) and supplies … to be used in the installation … while at a job site and intended to become a permanent part of the project ….” Since the insured's installation work was not completed when the loss occurred, we contend that the damaged property fits this definition. What is your opinion?

South Dakota Subscriber

Covered property and property not covered in an installation floater are described in the floater. The insured's materials, supplies and equipment that will be (and are being) installed in a project are covered property; property not being installed, like buildings, land or completed projects are not covered property. Coverage under an installation floater is very broad; that is, coverage is on an open perils basis, subject only to the exclusions listed on the policy. Since there seems to be no dispute that this was a covered cause of loss, the question of whether the wires are covered property is crucial to the coverage issue.

The insurer appears to be taking the position that property is no longer covered property once it has been used in an installation at the job site. That is far too strict a reading of the definition of covered property, and it is in opposition to the following crucial aspect of an installation floater.

The floater has a provision that describes when the insurance ends. That clause notes that the insurance ends at the earliest of the following times: the policy expires or is cancelled; the purchaser accepts the covered property; the insured no longer has an insurable interest in the covered property; the insured abandons the installation project with no intent to complete it; the project has been completed for more than thirty days; or the covered property is put to its intended use. You stated that the insured was not finished with his work and was actually testing the wiring when the damage was discovered. Clearly, the general contractor (or the building owner) had not yet accepted the work of your insured as a completed operation, the wiring was not put to its intended use, and none of the other events had occurred. So, the insurance under the installation floater had not ended.

Based on the facts that the insurance had not yet ended and that the insurer has narrowly interpreted a definition that can reasonably be seen in a different way, we believe that the installation floater would apply to this claim.

 

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