Our client was a tenant in a building that burned to the ground. The tenant used the facility for storage, and it was rated accordingly. The only insurance the client had for the location was for business personal property in the amount of $100,000. A number of recorded reel-to-reel and cassette tapes were destroyed in the fire that have intrinsic value and cannot be replaced because many of the recordings were done by famous people who are, for the most part, now deceased. .

The adjustment of the loss to the recordings was done according to the following coverage extension of the policy:

a. Fine Arts

You may extend the insurance that applies to Business Personal Property to Fine Arts. This Coverage Extension applies to direct physical loss of or damage to that property caused by or resulting from a Covered Cause of Loss at the described premises.

Fine Arts means art, antiques, rare articles, paintings, etchings, pictures, tapestries, art glass

Windows, valuable rugs, statuary, marbles, bronzes, antique furniture, rare books, antique silver, manuscripts, porcelains, rare glass, bric-a-brac and similar property of rarity, historical value, or artistic merit.

The most we will pay under this Coverage Extension is $25,000 at each described premises

The insured understands that the recorded tapes are under the classification of fine art due to the historical and cultural value of the content of the tapes. The part the insured is not clear about is that the tapes were in the process of being digitalized for commercial distribution. Some of the tapes were not lost because they had already been transferred to a studio for remastering.

The recording studio defines the potential business loss to the insured as follows:

Recording Masters

This is the value of the recordings as they relate to business exploitation. We were in the process of transferring them to CD to renew distribution (they had only been available on cassette previously). There is a substantial time savings working from a prepared master versus the original recording (it is already edited, equalized and timed).

The insured is claiming that the loss of the masters, which were stored in the warehouse and destroyed in the fire, creates a business income loss because the process has been made more time consuming and costly without the use of the masters that were destroyed.

Can the loss of time and expense to recreate the masters be recouped under business income coverage or in the calculating the value of the tapes? (The insured has been paid the limit under the extension of $25,000. for all recordings,  regardless as to whether they are master recordings or not. The only possible area for coverage from our review of the form may be in the extra expense coverage.

California Subscriber

It is our opinion that reproducing the masters would not really be considered an extra expense unless the insured did something like send the tapes to a company that could recreate/produce masters more quickly and paid more to do so. The loss could be considered a business income loss if it caused a slowdown of the business and the insured could show that income was indeed lost.