We have a client (a workout gym) that had a fire January 1. Friends and customers started a GoFundMe which raised $30,000 in January. Insured was able to relocate down the street in temporary space. Relocation and temporary expenses are being considered as extra expense; but have yet to be paid.
Insurance company accountant wants to use the GoFundMe donations as an offset to the income loss. We said donations are not business income and the donations went to pay for uninsured loss. (BPP insured for $90,000 and loss was $130,000).
Is their logic correct, Example: if we give a neighbor who had a kitchen fire a casserole; should that come off their insurance claim's food loss.
Is there FC&S guidance on donations after a fire, specifically monetary, for a business where good-natured friends are looking to help; not hurt.
Pennsylvania Subscriber
A GoFundMe or other donations to the insured would not be ordinary income that should be considered in the loss calculation for business income and extra expense coverage.
The definition of business income is net profit or loss that would have been earned or incurred and continuing normal operating expenses incurred. The donations do not meet this definition, as they are not income that would have been normally earned. Rather, the donations would not have been available to the insured but for the loss. These funds are not ordinary income and should not be considered in the loss calculation or settlement.