Photo by Jonathan C. Wheeler. Used under a Creative Commons Attribution 2.0 license.
Question from an IIABNY member: I have attached pages 1 and 2 of the ISO Building and Personal Property coverage form (CP 00 10 06 95). Our question pertains to “Property Not Covered”, specifically item A.2.o. on page 2. This clause states that vehicles and self- propelled machines that are licensed for public road use, or operated principally away from described premises, are not covered property. Our question is whether or not non-motorized kayaks are considered “vehicles”, and therefore are not “covered property”.
Our insured had three kayaks stolen. They were not in the water when stolen. They were temporarily away from the insured premises, on dry land. Insurer is denying coverage under A.2.o, claiming that the kayaks are vehicles principally operated away from the described premises, and therefore are not “covered property”.
There is coverage included for business personal property away from premises (The policy in question includes a limit of $500,000 for Business Personal Property that is temporarily at a location not owned, leased, or operated by the insured).
A kayak is watercraft, but not self-propelled. We believe the wording of A.2.o. is intended to make a distinction between “vehicles” and “self-propelled machines.” We also think the intent of the wording “including aircraft or watercraft”, which is in parentheses after “self-propelled machines”, is intended to apply only to self-propelled machines, not to vehicles. In other words, only self-propelled watercraft that is operated principally away from premises are “property not covered”. At least this is the way it has always been explained to me and the way I have seen it interpreted by insurance companies the past 30 years.
The insurer disagrees. They feel that all watercraft including kayaks are “vehicles”. They feel that paddleboards, surfboards, inflatable floating lounge chairs or rafts, boogie boards, inner tubes, & other such personal floatation devices are “vehicles” because they can convey persons or property from point A to point B. Following that logic almost any property that a person could use to convey themselves or their property on land or in the water, which is used primarily away from their premises, would be considered a “vehicle”, which I don’t believe is the intent of 2.A.o.
I have never heard anyone in the insurance industry, whether adjusters, or underwriters, even with marine insurance, ever refer to watercraft as a vehicle. Are we wrong in thinking that this loss should be covered under the business personal property away from premises extension, and that these kayaks are not vehicles?
Answer: This is a tough one, but I think I have to side with the insurer. I will grant you that it splits some pretty fine hairs, but here is my line of thinking.
The provision in question is:
Covered Property does not include: …
o. Vehicles or self-propelled machines (including aircraft or watercraft) that:
(1) Are licensed for use on public roads; or
(2) Are operated principally away from the described premises.
This paragraph does not apply to:
(1) Vehicles or self-propelled machines or autos you manufacture, process or warehouse;
(2) Vehicles or self-propelled machines, other than autos, you hold for sale; or
(3) Rowboats or canoes out of water at the described premises; ...
The form states that Covered Property does not include vehicles or self-propelled machines. Right off the bat it makes a distinction between transportation property that has its own power and property that doesn’t. It implies that “vehicles” are not self-propelled, and the other type of property is.
Your interpretation of the phrase in parentheses is not unreasonable. I think it would have been clearer for ISO to say, “Motor vehicles, aircraft, watercraft, and other vehicles or self-propelled machines …” It is very easy for a reader to conclude that the phrase in parentheses applies to self-propelled machines and not vehicles.
However, since the policy does not define “vehicles,” I checked the dictionary (I’ve read enough court opinions to know that judges often do this to determine a word’s plain and ordinary meaning.) The American Heritage College Dictionary has six definitions of “vehicle,” but only the first is relevant here:
“1.a. A device or structure for transporting persons or things; a conveyance: a space vehicle. b. A self-propelled conveyance that runs on tires; a motor vehicle.”
According to this definition, a vehicle can be self-propelled or not. Using this, a mode of transportation that relies on human power is a vehicle (bicycle, sled, etc.) It follows from this definition that a kayak is a vehicle. It also fits within the second of the two criteria given by the form – it is operated principally away from the described premises.
It’s also worth noting that the paragraph gives coverage back for rowboats and canoes out of the water at the described premises. If ISO did not intend to exclude non-self-propelled watercraft, it would be unnecessary to specifically identify these items for coverage.
Based on this, I believe the denial of coverage was correct. It would be different if the kayaks were for sale – the form clearly includes such items within the realm of Covered Property. If they were not for sale, then coverage does not apply.
I realize this isn’t what the client wants to hear, but I believe it is the correct interpretation.
Readers, what do you think? Agree with my conclusion or disagree? Leave your thoughts in the comments.