Q: “I insure a tool and die shop on policy forms CP 00 10 06 07 and CP 10 30 06 07. The form reads that building coverage includes permanently installed machinery and equipment, but does not define 'permanently installed.’ Can you help me with a definition?"

A: “Since the policy does not define the term, you would have to look to dictionary definitions or case law, and the latter will probably be very fact-dependent. In the absence of a definition, the solution is to remove the ambiguity if at all possible. The most important thing is to reach a meeting of the minds between the insured and underwriter so the limit of insurance that applies to this equipment is adequate (no coinsurance penalty) and properly described, covered and rated.

If the insured were to move, would they unbolt this equipment and take it with them? If so, it's probably business personal property and should be covered that way. Otherwise, it's building property and can be covered under the (usually lower) building rate and by the same perils that apply to the building, which are sometimes superior to broad named perils personal property coverage.

If the intent is to cover this as part of the building, one way to remove all doubt is to use the ISO CP 14 15 - Additional Building Property endorsement and schedule the equipment. Governed by CLM Division 5, Rule 30.C., this endorsement can cover machinery, fixtures and equipment that are affixed to the building but where the permanency of the installation is debatable. Again, make sure all parties are on the same page.”

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.