Twice over the last couple of months, we have had clients vans, trucks or trailers broken in to and tools stolen. Well, "Broken in to" is a relative term and one that can have big implications in an insurance claim settlement. You see, many business insurance and contractors' insurance policies have a warranty in the policy, called the "Locked Vehicle Warranty". A warranty is something that is very important to pay attention to in an insurance policy because it can void your coverage if it is not followed.
So, for example, the locked vehicle warranty in one of our insurance companies' policy reads as such:
"Locked Vehicle Warranty :
This clause does not apply to property which is under the control of a common carrier.
Warranted by the Insured that any vehicle in which the insured property is carried is equipped with a fully enclosed body or compartment, and the Insurer shall be liable in case of loss by theft from an unattended vehicle only as a direct result of forcible entry (of which there shall be visible evidence) into such body or compartment, the doors of which are securely locked and the windows closed."
What does this mean? Well, basically, it means that if there is no visible sign of forced entry, and/or there is other proof that the vehicle was unlocked, and articles are stolen from the unlocked vehicle - then there is no coverage and if you submit a claim, it can be denied based on this warranty.
The intent of this warranty is to promote good risk management practices, which we strongly support. The best way for us, as your insurance broker, to protect you from a loss - is to help you avoid it in the first place. When you leave a vehicle, lock the door and/or gates on your trailer ... discouraging thieves from an easy target. The locked vehicle warranty is definitely meant to void coverage if you are not taking practical steps to protect your belongings.
So the advice to all builders, contractors, etc. - is to lock your vehicles when it is not directly monitored. Pack up your tools that you will be using for the day, lock the vehicle and then work on the job site. We understand that contractors may go back and forth to their vehicle throughout the day to get and replace tools. If at all possible, we suggest locking vehicles between trips.
In both recent cases we have been involved in, which started by the insurance company denying the claim based on the vehicle being on the job site and not locked - we were able to successfully represent our clients and convince the insurance company that in those cases it was not reasonable to expect the vehicle to be locked - and therefore win our clients the appropriate coverage for their losses. However, and this is a big HOWEVER.... there is no guarantee that an insurance company would react this way next time.... and even in the best case scenario - where we are able to act on the behalf of our client and gain them coverage - it means a significant delay from time of the theft until you get your claim paid. If you leave your truck unlocked at night or while you are in a restaurant having lunch and your tools go missing, there is no good argument to try to get coverage.
So, if at all possible, always lock your vehicle when it is not attended, to protect your tools and materials - this is good risk management. If you have a loss when at a job site and it was not reasonable for the vehicle to have been locked, discuss with your insurance broker and get them to help you through the claims process.
Ryan Dostie, CA, CFP Partner Welch LLP - Chartered AccountantsRead more »