The office of one of my insureds, an attorney, was recently destroyed in a fire. My insured is covered under the businessowners special property coverage form (BP 00 02 12 99) for his business personal property. He has increased coverage for valuable papers and records, and loss of income.
The insurer has taken the position that replacement of, or a reasonable time allowed for replacement of business personal property items, constitutes the termination of the "period of restoration" for loss of income. In their interpretation, business personal property only means such items as computers, furniture, and other office essentials used in the conduct of day-to-day business. They hold that the actual loss sustained is measured by the loss to the office property other than the records.
We feel that it is reasonable to assume that an attorney's valuable papers and records are far more time consuming to replace and critical to his or her conduct of business than typical office furnishings would be. Furthermore, by providing our insured with the option to increase the limits of liability tenfold relative to valuable papers coverage, the insurer should have been fully aware of time it might take to replace this property in a total loss situation.
What is your opinion?
Illinois Subscriber
The business income provision of the businessowners policy states "We will pay for the actual loss of business income you sustain due to the necessary suspension of your operations during the period of restoration. The suspension must be caused by direct physical loss to the property at the described premises…" Because the term "property" is not specifically defined in the policy, it can apply to any business property owned by the insured that is at the described premises. It is damage to this property that triggers coverage.
Perhaps the insurer is thinking of the costs associated with replacing the valuable papers and records, coverage for which falls under the coverage extension for valuable papers and records. This coverage extension applies to the physical damage to the papers, and to the costs associated with researching them and replacing them. However, such costs are entirely separate from any loss of income sustained during the time it takes to research and replace the records and papers. The two coverages should not be confused; they are distinct. The lost business income is covered.