Q

Our insured has a businessowners policy, ISO special form BP 00 02 06 89. In August lightning destroyed the computerized phone system to the extent it cannot be repaired, and must be replaced.

We have located a used reconditioned phone system of the same make and model as that which was damaged and have offered to purchase and install it. It is our opinion that this will meet our policy obligation, since the policy states “at our option, we will either: 2. pay the cost of repairing or replacing the lost or damaged property.” The insured, however, feels he has a replacement cost policy and is entitled to a new phone system.

Missouri Subscriber

A

The policy states that the value of covered property (the phone system) will be determined “at replacement cost (without deduction for depreciation).” A reconditioned phone system is still a used phone system, and, as such, is depreciated. The policy promises the insured that losses to covered property will be adjusted on a replacement cost basis. Note that replacement cost means “new for old.” The insured is entitled to a new phone system.