The insured owns a tanning salon. He is insured on a standard commercial property form, with the CP 00 50 04 02, Extra Expense, endorsement. There is no business income endorsement. Many of his customers pre-pay for a number of sessions, or have monthly fees directly taken from their credit cards.
He suffered a covered loss in which four out of the seven beds were rendered unfit for use. In order to keep his business alive (particularly in the light of many customers having pre-paid), he contracted with another tanning salon for his customers to use the other salon's tanning beds. He paid the other salon $8 per person/per session, which is what his customers paid.
When he submitted this expense to the insurance carrier, however, the claim was denied. The adjuster stated this was a business income loss and not covered. May we have your opinion?
Pennsylvania Subscriber
The extra expense coverage form states "extra expense" means "necessary expenses you incur during the 'period of restoration' that you would not have incurred if there had been no direct physical loss or damage to property." These extra expenses include those "to avoid or minimize the suspension of business and to continue 'operations' at the described premises, or at replacement premises or at temporary locations."
Since the insured has, through contracting with another tanning salon to serve his customers, incurred expenses he would not otherwise have had, there is coverage. He has minimized the suspension of business through this arrangement. Further, the endorsement does not state the insured must own, rent, or lease the "replacement premises," so the use of the other tanning salon becomes the insured's business's "temporary location."