A hotel client suffered a fire. The hotel is large and is located in a rough neighborhood. The policy appears has ISO language for extra expense and business interruption. The extra expense language allows coverage for expenses incurred to avoid or minimize the suspension of operations. The policy further stipulates that the insured must take steps to preserve and protect the property from further damage.

As a result of the fire and in order to minimize the suspension of operations as well as to preserve and protect the property, the insured retained a security service to protect the site. The insured is concerned that without security the building may be vandalized and suffer further damage thereby increasing the suspension period. The insurer has refused to pay for the security costs. The insured believes that the carrier should pay for security at least until the claim is settled.

California Subscriber

The cost for security could be considered an extra expense. If it meets the criteria—it must minimize the suspension or if the business cannot operate minimize the business income loss—and if it is an expense that would not have been incurred except for the loss, then it should be considered an extra expense. But if, for example, the insured already employed security (as the hotel is in a bad neighborhood), then it may not be considered an extra expense but a continuing operating expense.