Here is a real life mysterious disappearance claim, guy goes into a hospital bathroom to wash his hands. He is distraught, his wife is in the hospital. Takes his Rolex watch off while washing, finishes and walks out of the bathroom. Hours later realizes his watch is missing. Returns to the bathroom and no watch! Not in lost and found either.
An unfortunate situation but how would insurance respond?
Under typical Home, Condo and Renters insurance there may be coverage. but the wording of your policy will be critical. There is a better way to remove the gray area but lets cover some basics first.
Personal Property insurance falls in two categories:
- Named Peril (causes of loss are listed in the policy) aka Broad Form
- Open Peril (only exclusions are listed) aka Special Form
Seems a subtle difference but ends up being a big difference in the case of mysterious disappearance.
Named Peril Problem
In this story the insured had a “last known place” for his watch. If a policy includes “attempted theft and loss of property from a known place when it is likely that the property has been stolen”, coverage could apply.
However, change the situation slightly. The watch was removed from the owner’s wrist in more than one location. Gray areas leave insurers the option of denying claims so preventing grey areas is a better strategy.
Special Form Solution
A better way to handle mysterious disappearance would be to insure personal personal property using a special form cause of loss. There is not exclusion for our example and no need to keep track of “last known places”.
Deductible will apply but there is more. How do you get special form coverage? Buy a home, condo or renters policy that is special form and not broad form. Ask for it specifically but you will pay a bit more.
It ain’t over until it’s over
We eliminated gray areas in coverage but left out one huge detail. Even with a broad theft peril or lack of an exclusion for mysterious disappearance, certain types of property are subject to a sublimit.
Jewelry, watches, furs and firearms are common property types subject to a sublimit.
In the example, if the Rolex watch value was $10,000 it would be subject to a sublimit of $1,500 to $2,5000 on average. This will vary by insurance company so check your policy.
- $10,000 Replacement Cost
- minus deductible
- capped by sublimit
The best way to handle this kind of loss will be another article.