Our agent wants to combine business property with business property of others for each location.

The package policy is all risk including theft, agreed value, and replacement cost. There are several locations. We have building, personal property, personal property of others, and business income and extra expense on a blanket basis but not all combined into one limit.  We have separate blanket limits for each.   

The agent's reason for wanting to combine into just regular business property is that some of the machinery or equipment they fabricate is paid for by their customers until it is ready for them to pick up. So, those items may sit for a while and yet they are paid for at that point.    

We have concerns about the following: 

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  1. How would the owner of the machinery or equipment be paid in the event of a claim? Our insured would not have a financial responsibility for those items once they are paid for.
  2. Since we have business income and extra expense coverage, could we end up with costs associated with the item being damaged, and thus creating a production shut down in the end users plant?

Michigan Subscriber

This type of arrangement could be problematic. To answer your two concerns:

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  1. The insured would receive the payment for the owner's machinery or equipment. There would be no contractual obligation for the insured to pay the owner.
  2. The insured would have no obligation to the owner under its business income and extra expense coverage for business income losses the owner incurs due to the machinery being damaged on the insured's premises. It would not be the insured's business income loss.

One other area of concern we see is that trying to combine these limits under the general title "business personal property" would leave no coverage for the machinery that is already paid for except a small amount under the Additional Coverage for personal effects of others. Because this property no longer belongs to the insured and is property of others in its care, custody, or control, unless the policy is amended to state that business personal property also means personal property of others in the insured's care, custody, or control, the machinery would not be covered as the insured's business personal property.

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