Other Insurance Clause
and Excess Coverage

Q

Our insured operates a computer repair shop, and regularly has the property of his customers in his care, custody, and control. His commercial property policy was endorsed to increase the limits applying to personal property of others to $110,000, adequate for his maximum exposure. In addition, the policy was endorsed to extend coverage for personal property of others for all covered causes of loss and at replacement cost value.

The insured recently had a burglary and several computers were stolen. The adjuster indicated that the other insurance clause on the commercial property conditions form renders our insured's policy excess of any other insurance that the insured's customers may have on the computers, collectible or not. But the insured, having paid an additional premium for the increased coverage, expected his policy to respond to such a loss on a primary basis, and he is upset.

Can you give us your opinion on this issue?

New Mexico Subscriber

A

We don't agree with the adjuster in his interpretation of the clause as being excess. We believe that the other insurance clause in this instance applies to other insurance coverage that the named insured may have, and not other insurance that an entirely different party has. For example, if your insured had a commercial property policy and a bailee's property policy applying to the computers of customers, that is when excess coverage comes into play. However, if your insured has a commercial property policy covering a customer's property and the customer has a policy that provides coverage for the same property, that is not what the other insurance clause affects.

Your insured has a legal responsibility for the computers in his care and custody, and he has bought insurance (and paid additional premium) to cover that legal responsibility. The owners of the computers have insurance to protect their property because it is their property, but that ownership and the insurance policies do not relieve your insured from his responsibility. To allow the other insurance clause to convert your insured's policy to excess coverage is to shift some of his responsibility to the owners of the stolen computers and that is not the purpose of the clause. And, if the customers' insurers paid for the losses under their policies, the insurers would simply seek to recoup their payments from your insured; the excess insurance argument would certainly not work in such a situation.

Your insured's commercial property policy is primary coverage for this loss and the adjuster is not reading the other insurance clause correctly.

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