Our agency recently encountered a personal lines claim dealing with the theft of cash and gift certificates. The insured made a claim for the loss under his homeowners policy form HO 00 03 10 00. The insurer paid the cash loss up to the $200 special limit of liability, but denied coverage for the gift certificates on the grounds that they are not money. We believe that the gift certificates are the equivalent of letters of credit or notes other than bank notes which have coverage of up to $1,000 under the policy; the gift certificates were worth $870. Would the homeowners policy cover theft of gift certificates?

Michigan Subscriber

We believe that, under the 1991 homeowners forms, an argument can be made that the gift certificates are evidence of debt, and so are covered up to the $1,000 special limits of liability. The reasoning here is that someone has purchased the gift certificates with a certain amount of money. The store from which the certificates have been purchased has, in effect, given the purchaser a receipt for that certain amount which the store will honor at some future time for the purchase of some item. The store has given the purchaser evidence that it owes a debt to the person who redeems that evidence, a debt redeemable in goods. The insurer is correct in saying that the certificates are not money since they are not meant to be redeemed for money, but they are evidences of debt which are covered by the homeowners policy.