Newly Acquired Buildings Coverage and Tenants

March 31, 2016

Our client has a Businessowners policy and used to be the tenant in the building with option to purchase the building. The last payment was made on December 6, 2015, and the warranty deed transferred on December 23, 2015. The insured did not notify our agency that they had purchased the building.

The policy provides coverage for newly acquired buildings and personal property up to $500,000. The insured suffered a fire on January 22, 2016. The damage to the contents was being covered for the full amount (over $20,000); however, the adjuster indicated that the building would not be covered, even under the newly acquired buildings provision. The adjuster indicated that the insured must already have building coverage for that coverage to extend to a newly acquired building. Is this correct?

Ohio Subscriber

Generally, the insured does need to already have building coverage in order for any type of newly acquired or constructed property coverage to be extended, and even then, the policy may not address the situation you describe where the insured acquires the building it once leased. It really depends on how the policy is worded. For instance, the ISO Businessowners form, BP 00 30 07 13, states that the coverage extension for newly acquired or constructed property coverage is extended to either new buildings while being built on the described premises or buildings the insured acquires at premises other than the described premises. Neither of these would afford coverage for your client.

This premium content is locked for FC&S Coverage Interpretation Subscribers

Enjoy unlimited access to the trusted solution for successful interpretation and analyses of complex insurance policies.

  • Quality content from industry experts with over 60 years insurance experience, combined
  • Customizable alerts of changes in relevant policies and trends
  • Search and navigate Q&As to find answers to your specific questions
  • Filter by article, discussion, analysis and more to find the exact information you’re looking for
  • Continually updated to bring you the latest reports, trending topics, and coverage analysis