Case Study: Electronic Apparatus

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By Phyllis Van Wyhe, CPCU, CIC, CSP

Printable Version

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Skip Chapman is a financial adviser who has just acquired a state-of-the-art laptop computer to stay in touch with his office.  With all the necessary peripheral equipment, the price tag on this necessity was $6249.  Two weeks after the purchase, and before Skip could inform his insurance agent of the new purchase, the computer was stolen.  Is there any coverage if:

• The laptop was stolen from Skip’s home?
• The laptop was stolen from Skip’s car?
• The laptop was stolen from Skip’s office?

Sorting out the coverage for electronic apparatus is one of the most challenging aspects of dealing with the ISO Homeowners policy.  With the 1991 revision of the contract, the coverage has changed.  There is currently an exclusion for one type of electronic apparatus and limitations on another kind.

ELECTRONIC APPARATUS

While electronic apparatus is not defined in the policy, there is a wide variety of equipment that contains electronic components including such things as laptops, televisions, radios, CD players, CB radios, electronic offices, and many others.  The current Homeowners policy distinguishes between two types of electronic apparatus:

Electronic apparatus that is designed to be operated solely by use of the power from the electrical system of a motor vehicle.  An example of this would be a CB radio.

Electronic apparatus that is "equipped to be operated by power from the electrical system of the vehicle or conveyance while retaining its capability of being operated by other sources of power."  You can think of this type of apparatus as "adaptable electronic apparatus." An example might be a laptop computer that can be operated by plugging it into a car, plugging it into the wall outlet, or simply running it off of its own charged battery.

Before we look at the way the Homeowners policy responds to these two types of electronic apparatus, it is important to mention that when the policy deals with electronic apparatus, it includes:

1. Accessories or antennas; and
2. Tapes, wires, records, discs or other media; for use with the electronic apparatus.

APPARATUS EXCLUDED

The third exclusion under the Property Not Covered section of the Homeowners policy is the motor vehicle exclusion.  This exclusion applies not only to the vehicle itself, but also some electronic apparatus.  The apparatus that can only be operated from the electrical system of a motor vehicle is excluded from coverage "while the property is in or upon the vehicle or conveyance." A CB radio, for example, is not covered under the Homeowners policy if it is destroyed or stolen while in the vehicle itself.

APPARATUS SUBJECT TO LIMITATIONS

On page 2 of the ISO Homeowners policy one finds a list of personal property that is subject to limitations.  There is a limit of $200 on money and $1000 on boats.  With the 1991 revision of the Homeowners policy, ISO has added an additional condition to limitation #9, which is the limitation for business property off the premises.  At the same time, two new limitations, #10 and #11, have been added.

We will first review the two exclusions that apply to business personal property, and then explore the two that apply to electronic apparatus.

Limitations #8 and #9 apply to business personal property:

8. $2500 on property, on the ‘residence premises,’ used at any time or in any manner for any ‘business’ purpose.

9. $250 on property, away from the ‘residence premises,’ used at any time or in any manner for any ‘business’ purpose.  However, this limit does not apply to loss to adaptable electronic apparatus as described in Special Limits 10. and 11. below.

Because we are already familiar with the above limitations, we know there is a limit of $2500 on business personal property while on the premises, and $250 for the property when off the premises.  The area bolded is the new language that has been added with the 1991 revision.  It states that the $250 limitation does not apply to electronic apparatus limited in Special Limits #10 and #11.

Let’s look at Special Limits #10 and #11, in turn.

10. $1000 for loss to electronic apparatus, while in or upon a motor vehicle or other motorized land conveyance, if the electronic apparatus is equipped to be operated by power from the electrical system of the vehicle or conveyance while retaining its capability of being operated by other sources of power.

This limitation applies only to adaptable electronic apparatus.  It limits coverage for this equipment to $1000 while it is in or upon a motor vehicle.

11. $1000 for loss to electronic apparatus, while not in or upon a motor vehicle or other motorized land conveyance, if the electronic apparatus;

1. Is equipped to be operated by power from the electrical system of the vehicle or conveyance while retaining its capability of being operated by other sources of power;
2. Is away from the ‘residence premises’; and
3. Is used at any time or in any manner for any ‘business’ purpose.

This limitation also applies only to adaptable electronic apparatus.  It applies only when the equipment is used for business.  Coverage for adaptable electronic apparatus is limited to $1000 when the equipment is not on the "residence premises" and is not in or upon a motor vehicle.  A laptop used in business and stolen from the airport would be covered for only $1000.

The dollar limits on these two limitations can be increased by use of the ISO endorsement, HO 04 65 04 91, COVERAGE C INCREASED SPECIAL LIMITS OF LIABILITY.  With this endorsement the dollar limits on limitations #10 and #11 can be increased from $1000 up to $5000.  The other way to cover the exposures is to specifically schedule the electronic apparatus, taking into consideration any business use.

SKIP’S PROBLEM

The coverage the Homeowners policy affords for Skip’s laptop will vary significantly depending on where the laptop was at the time of loss.  The fact that Skip uses the laptop in his business will also impact recovery.  Let’s look at what Skip can expect under various scenarios:

The equipment was stolen from Skip’s apartment.
The limitation here is found in Special Limit #8. Skip can expect to collect $2500.  If the laptop were never used in business, Skip would have the entire personal property limit available.

The equipment was stolen from Skip’s car.
Special Limit #10 will limit coverage to $1000, whether the equipment is used in business or not.

The equipment was stolen from Skip’s office. If the equipment is not on the "residence premises" and not in or upon a vehicle, it is limited only by Special Limit #11. Skip will have only $1000 of coverage since his computer is used in business.  If there were no business use, the entire personal property limit would be available.

THE BOTTOM LINE

We have been discussing the ISO Homeowners policy and how it applies to electronic apparatus. When writing a Homeowners there are two specific recommendations:

Electronic apparatus that can only be used by the electrical system of a motor vehicle should be scheduled on the auto policy.  This includes the discs and tapes that are used with the apparatus.

Electronic apparatus that is adaptable needs additional coverage if it is valued at over $1000, ever leaves the premises, or is used in business.  Refer to the chart below to determine the limitations on coverage.

Electronic Apparatus

Electronic apparatus includes:

1. Accessories or antennas; or
2. Tapes, wires, records, discs or other media; for use with any electronic apparatus.

  Adaptable Electronic Apparatus

Definition: Electronic apparatus that is equipped to be operated by power from the electrical system of the vehicle or conveyance while retaining its capability of being operated by other sources of power.

Used In Business No Business Use

On Premises $2500 Limitation Full contents limit  (See Special Limit #8) is available

In Or Upon $1000 Limitation $1000 Limitation the Vehicle  (See Special Limits #9 & #10) (See Special Limit #10)

Elsewhere $1000 Limitation Full contents limit (See Special Limit #11) is available

Excluded Electronic Apparatus

Definition: Electronic apparatus that is designed to be operated solely use of the power from the electrical system of motor vehicles or all other motorized land conveyances.

The Homeowners policy excludes this property from coverage "only while the property is in or upon the vehicle or conveyance."

This article is excerpted from the book Case Studies In Personal Lines, written by Phyllis Van Wyhe, CPCU, CIC.