The question of the month deals with improvements, alterations, and additions and how these items are insured by tenants. When a tenant invests in improvements in property leased as a residence and is able to use and enjoy the additions, all is well. But, suppose a fire or other insurable cause of loss damages or destroys the improvements? Since the improvements actually belong to the landlord, the tenant has lost no property; however, the tenant has lost the use of the property, and it is the right to use the improvements for the term of the lease that creates the tenant's insurable interest in them.

So, the question then arises: how does the tenant insure against a loss to the additions, alterations, or improvements that he has made? For the answer to questions about coverage for improvements, alterations, and additions made by a tenant, see the designated article in the Bulletins.

One of the court cases in the Dec Page concerns no-fault benefits that are available to a passenger in a stolen car. Under the Michigan no-fault law, a person is not entitled to be paid personal protection insurance benefits for accidental bodily injury if, at the time of the accident, the person using the vehicle had taken it unlawfully. The injured party in this instance had not taken the car but was riding in it after it had been stolen. The Michigan Court of Appeals had to decide if the passenger violated the no-fault statute and thus, was barred from recovering any no-fault benefits.

The other court case comes from Texas where an appeals court discussed the meaning of the word “theft”. The property policy in question provided coverage for vandalism but excluded loss or damage resulting from theft. The criminal tried to steal copper pipes but was caught by police before he could leave the premises. Was the damage he caused vandalism or did the damage result from his theft? The court relied on its interpretation of Texas law to decide this case and in so doing, emphasized the point that if an insurance policy does not define its important terms, a court will do it.

The final piece of information in the Dec Page is an article by Professor William Byrnes and Mr. Robert Bloink, Esq. pertaining to the new Federal Insurance Office. This office was created under the Wall Street Reform Act and its impact on the insurance industry will be interesting to note. The authors of this article describe the functions of the Federal Insurance Office and offer a clue as to a possible future role for the Federal government in the regulation of insurance.

Questions and Answers

Does the insured vehicle have to strike an object in order for a collision to occur, or can the vehicle suffer a collision when it is struck while parked? See Collision Loss Designation Disputed by Insured. The insured has GKLL direct primary coverage as well as a CGL form for his parking garage. If a customer parks his own car and damage occurs while he is gone, is there coverage for a claim under the GKLL direct primary or under the CGL form? See GKLL Direct Primary Coverage Compared to CGL Coverage.

Is there a wear and tear exclusion under the garagekeepers coverage? See Garagekeepers Coverage and Valet Parking. The insured improperly installed a dishwasher and caused water leak damage. The claimant could not find a match for the flooring and wants the entire floor throughout the house replaced. Will the CGL form pay for an entire floor since no match can be found? See Impaired Property Exclusion and Mismatched Flooring. Will the designated premises endorsement preclude coverage if a loss occurs during an off-site product demonstration? See Designated Premises Endorsement and Off-Site Risk Exposures.

                                   Governmental Action

Property coverage forms commonly contain exclusions for loss caused by governmental or public authority's destruction, confiscation, or seizure of property. However, this denial of coverage is far from being a done deal. The article discusses the application of the exclusion as found in various court cases. The article analyzes judicial decisions as the courts discuss the exclusion and its scope as found in commercial lines policies and personal lines policies. See Governmental Action.