Permanent or Personal Property?
In most cases, no advance thought is given to whether certain properties are "permanently installed fixtures" or personal property, leaving a business owner without adequate coverage once a loss occurs.
Trying to resolve this question after a loss can complicate and unnecessarily delay a claim settlement.
The difference between the two terms is small, however, with insurance coverage it can mean the difference between receiving the correct amount of compensation for your damages or having to close the doors of your business.
"Permanently installed" fixtures, machinery, and equipment may be insured as part of your building, at the building's insurance rate. Other fixtures, machinery, and equipment are commonly treated as contents, insurable at a generally higher personal property rate.
While the term "permanently installed" is not defined in standard property insurance forms, the following types of property are included as permanent fixtures: completed additions, outdoor fixtures, and personal property you own that is used to maintain or service the building or its premises (this term extends building coverage to lawn and yard maintenance tools).
Specific examples of these "permanent" items include: fire extinguishing equipment, outdoor furniture, floor coverings, and appliances used for refrigerating, ventilating, cooking, dishwashing, or laundering.
Also covered are additions under construction, building alterations and repairs, materials, equipment supplies, temporary structures used for these additions, and alterations or repairs on or within 100 feet of the insured premises.
Distinguishing between permanent items and personal property becomes tricky when dealing with operating machinery bolted to the floor, walk-in coolers and freezers, or shelving. These items may qualify as "permanent" if they stay in the building, or as personal property if they are removed by the owner when his/her lease expires. If the lease grants permission for the removal of the fixture, it is not eligible for coverage as a building item.
Some questions you should ask yourself when determining the difference between the two items include:
Is the property physically attached to or an integral part of the building?
Can the property be categorized as a long-standing installation, not something that will be moved or removed when retooling is done or when a new manufacturing process or assembly line is installed?
Is the property attached so that along with the building structure, it has become part of the realty or land on which the structure stands?
To avoid dispute when a loss occurs, or to determine the difference between the two, call Rothco Insurance at (626) 839-6061.
We are pleased to provide this "Bulletin" as a service to you. While this information was obtained from sources believed to be reliable, its accuracy is not guaranteed. It does not change or alter insurance contracts or coverages.
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