Q

Our client owns several commercial rental properties. Each of the buildings is insured on a BOP with special form perils.

A tenant in one of the buildings is a pharmaceutical company. Prior to renting to this tenant, the landlord had to have the area specially prepared. Specifically, the walls, floors, etc. were sanitized for the pharmaceutical company's operations.

Recently a windstorm took off most of the roof in the building housing the pharmaceutical company. The landlord's property suffered wind and water damage. The insurer has agreed to rebuild the building, but not to pay for the pharmaceutical company's area to be sanitized. We think they are wrong and would appreciate your opinion.

Puerto Rico Subscriber

A

You are correct. The BOP is written on a replacement cost basis for building items. In order to put the insured back to his previous position, the insurer must not only rebuild the building, it must also sanitize the area rented by the pharmaceutical company. To do less would not “replace” the damaged property with property of “like kind and quality.”