Many standard commercial property insurance policies will include coverage for vandalism, but not theft. Vandalism—the intentional and malicious damage or destruction of property—is often much less expensive than the theft of expensive computers and inventory.
One of the biggest problems with theft or vandalism claims is the insurer’s reluctance to cover damages due to the cause of the loss. Here are a few examples to illustrate how the distinction between theft and vandalism can complicate a claim:
- Vandalism turns into a burglary. Young people vandalizing the exterior of a building may break a window, escalating the crime into theft when they find valuable items inside.
- An attempted burglary destroys property. Burglars who are thwarted by security measures or do not find enough valuable items may trash the property out of frustration.
- A covered event leaves a property open to burglary. A restaurant suffers fire damage, and is boarded up until repairs can be made. Days later, burglars pry one of the boards open and steal the copper pipes out of the walls, which the insurer refuses to replace.
- A break-in followed by vandalism. There is a break-in at a warehouse and items are stolen. Later that night, vandals notice the open door or broken gate and paint graffiti on the walls. In the morning, property owners discover that there has been both a break-in and defacement of property, but the insurer will only pay for the broken lock and repainting the walls.
Your Risk of Theft and Vandalism Can Affect Your Coverage
As you may imagine, insurers are keen to limit the amount of coverage provided for theft losses. Insurance providers may require certain assurances from property owners when it comes to minimizing the risk of theft or burglary, such as the installation of surveillance and security devices, proper lighting, and adequate locks. Even with these precautions, owners may require higher coverage limits or special deductibles to contain theft losses.
A commercial property may be at higher risk of burglary losses due to:
- Location. Theft is more likely to occur in remote locations, especially those with low lighting and little foot traffic. Theft can also happen to goods on the move, which may not be covered by your insurer unless you have opted for inland marine insurance.
- Vacant buildings. Vacant structures are often targeted by looters and vandals, especially those looking to steal HVAC systems or appliances left behind.
- Copper content. Copper building systems, including copper pipes and wiring, are highly-prized by thieves. The theft of these fixtures can cause ongoing losses for owners by increasing construction costs and forcing the entire structure into compliance with current building codes during rebuilding.
- Inventory and contents. A warehouse containing electronics, car parts, jewelry, or other items that may easily be sold by thieves is naturally at higher risk of theft.
- Size. Larger properties naturally offer higher gains for thieves, especially if some portions of the property are not patrolled (such as fields, sheds, barns, or other outbuildings).
Common Reasons Theft and Vandalism Claims Are Denied
Even if an insurer is willing to insure against theft and vandalism, the insurance company may place a variety of limits or exclusions on these claims to minimize the scope of coverage. Owners are often underpaid for theft and vandalism claims simply because they don’t fully understand the terms of their property damage insurance policies.
For example, claims are often denied or underpaid because of the commercial policyholder:
- Cannot prove ownership of claimed items. Insurers are often wary of insurance claims for theft, as it is the most common form of insurance fraud. Unfortunately, this increases the burden of proof for victims, who must provide extensive documentation showing the ownership, date of purchase, and the location of all stolen items.
- Cannot prove that a break-in occurred. It is not enough to show that items are missing from the property to collect payment for theft. There must be evidence of trespassing or forced entry (such as broken windows, doors, or locks).
- Does not know the value of claimed items. Insurance companies may disagree with policyholders when it comes to assigning a dollar value to each stolen or damaged item. You may have to provide substantial documentation (such as receipts, credit card statements, or appraisals) to prove the extent of your losses.
- Failed to perform preventive maintenance. An insurer may challenge your claim if you left the property open to crimes of opportunity. A failure to protect against theft or vandalism could include allowing trees and bushes on the property to grow wildly, failing to replace broken deadbolts or security system alarms, or mounting exterior lights or motion sensors within easy reach.
- Has insufficient business interruption coverage. A burglary can prevent you from opening your doors to the public for a few days or may require temporary relocation to an alternate site. Your business interruption insurance policy limits should be high enough to cover your employee payroll, profit losses, commercial rent, and monthly operating costs to sustain you during repairs.
What to Do Immediately After Theft or Vandalism Is Discovered
The most important step to take after you have discovered theft or vandalism on your property is to call the police. A police report is invaluable to your claim, and insurers may outright deny coverage without it.
Not only does the police report offer an official record of the incident, but it also provides an officer’s opinion of the mode of entry and proof of property damage sustained in the break-in. You should include a list of stolen items in the police report and ensure that it matches the items listed on the insurance claim. If you discover additional items later, it is a good idea to update the police report and tell the insurance company you have filed a supplemental police report.
Once you have obtained a copy of the police report for your records, you should:
- File your claim. The documentation you give to your insurance company is directly related to the amount offered on your claim. Be sure to include photos or videos of the property taken soon after the incident, as well as any receipts for out-of-pocket expenses that will need to be reimbursed.
- Prevent further losses. Policyholders have to prevent further losses after a break-in, such as repairing windows and doors and making the space safe for visitors and employees. However, you should wait to make any permanent repairs until an insurance agent has seen the damage.
- Get help from an insurance litigation attorney. Unfortunately, commercial insurers often attempt to deny, devalue, or stall theft and vandalism claims rather than pay the full amount they owe. When this happens, it may be necessary to hire an attorney to advise you on your next steps.