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I'm dealing with a material damage policy, taken out by the insured, a property owner. The insured©s tenant runs a backpacking business from the building. The tenant allowed one of their staff members to occupy a room in the backpackers. The employee later left the role with the backpacking business. When the tenant (backpacking business owner) inspected the room, they noted that the carpet in the former employees room had been removed and replaced with an ill-fitting carpet. Does the building owner (the insured) have a claim against their MD policy under the theft extension? The MD policy excludes theft by an employee but it does not exclude theft by a tenant.

Reply: Crossley Gates

The first issue is who owned the carpet? Was it the landlord or the tenant? 

If it was the landlord, then the theft by an employee exclusion is unlikely to apply because the thief was not an employee of the landlord but rather an employee of the tenant.

March 2019

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