Product Loss Not Covered by Spoilage Endorsement

December 10, 2012

 

The loss occurred as a result of Hurricane Isaac. The insured was making normal purchases at the time of the storm. These items are date stamped for delivery, and if not sold by that date, have to be disposed of. The insured reports he did not lose power at his location during the storm. Yet, throughout Louisiana, especially New Orleans, Baton Rouge, and other areas, there was a loss of power. As the schools and restaurants were closed, he was unable to make deliveries. Therefore, he lost his product.

We denied this claim, and the insured is now stating there is coverage under the Spoilage Coverage endorsement, CP 04 40, Section C 3b. How do you interpret?

South Carolina Subscriber

The loss would not be covered. If the insured has a causes of loss form with the same or similar exclusions as the ISO CP 10 30, the loss would fall under the delay/loss of market exclusion, which is what caused the loss, not spoilage. The insured lost the items because the customers were not open for business to receive the products. The spoilage endorsement would not come into play for this loss. That endorsement adds perishable stock as covered property and adds the following causes of loss: change in temperature or humidity resulting from mechanical breakdown, contamination by the refrigerant, or power outage. None of these perils caused the insured's loss—it was the inability to deliver the goods that caused the products to reach their expiration dates.