The Basics of a Property Insurance Policy

The insuring clause may state that the policy will cover all risk of physical loss or damage (or both) in respect of property identified in the policy, although many policies may simply state that the policy covers loss and damage to the property without identifying types of properly but thereafter excluding certain classes of property. Another phrase common in the London market is “damaged or destroyed”.

The typical property covered will include real property such as a factory or warehouse and will probably include contents such as stock or, in other words, personal property as specified or otherwise excluded.

As mentioned above, policies vary as to whether or not they attempt to define the property cover in the insuring clause or whether they simply refer to “property” and exclude types of property later in the policy. Some policies will refer specifically to “buildings and contents”, whilst others may refer to “real property” which, unless otherwise qualified, would include all things attaching to the land so that they become part of it and therefore would probably include trees and landscaping around the buildings such as shrubberies and pathways. It may also include underground property such as drains, tunnels and pipes. In Hughes v.PotomacIns. Co., 199CalApp2d239 (1962), even the phrase “dwelling building” was held to include damage to the underlying land.

Frequently, however, whether the insuring clause refers to “property” or “real property”, the policy will exclude land, roads, pavements, bridges and also property in the course of construction or erection and material to be used in the course of the construction and erection of the property. On other occasions, the cost of restoring external landscaping may be referred to specifically and a separate limit applied in respect of each and every loss. It is difficult to identify any consistency and each ARPI policy has its own characteristics-particularly in respect to the manner in which it deals with property which is not part of the main building or contents.

Consistently, however, vehicles licensed for road use and other means of transportation, such as water craft, aircraft, caravans and locomotives are excluded from cover.

Also, certain types of personal property which are readily exchanged for cash or perhaps notoriously hard to value are also excluded, such as glass, china, fragile objects, jewellery, precious metals, precious stones, rare books, works of art, bullion, furs, currency, cheques, credit cards, deeds and similar items.

Policies will vary as to whether they cover computer and data processing as standard, as an extension or at all.

ARPI policies may also cover the assured’s interest in property owned by others, particularly where the assured is the custodian of that property.