An automatic car wash is insured under a CP 00 10 Building Coverage form, with the CP 00 30 Loss of Business Income Endorsement with RCV coverage. A covered loss occurred to the mechanical washing mechanisms inside the car wash. The mechanical mechanisms are older. Citing the current economic environment and possible supply chain issues, an LKQ version of the damaged part may not be available for a very long time, or at all. The estimated cost of the damaged part is significantly different than an updated replacement of the entire mechanical system. Does the insurance policy allow for coverage of a newer more up-to-date system, if it is determined that the LKQ repair/replacement is not available.
Kentucky Subscriber
It depends on what you mean by the "significantly difference" in cost between replacing the damaged mechanism with an LKQ mechanism and replacing/updating the system. Section G.3 of CP 00 10 states that "Replacement Cost (without deduction for depreciation) replaces Actual Cash Value in the Valuation Loss Condition of this Coverage Form." (emphasis added). Subsection (e.) gives the limits of the replacement cost coverage, which is the smallest amount of the following: "(1) The Limit of Insurance applicable to the lost or damaged property; (2) The cost to replace the lost or damaged property with other property: (a) Of comparable material and quality; and (b) Used for the same purpose; or (3) The amount actually spent that is necessary to repair or replace the lost or damaged property." If replacing the system is less expensive than waiting for an LKQ mechanism part, then replacing the system should be covered under Section G.3.e.(3) because the amount necessary to repair and replace the damaged property is less than the LKQ mechanism. If the applicable policy limit is less than the cost to replace the system, or if the amount actually spent would be more expensive than an LKQ part, then replacing the system wouldn't be covered. However, if it were shown that LKQ replacement is not possible under current circumstances, it would come down to amount actually spent or the policy limit.
Under the Extra Expense portion of the business income coverage form CP 00 30, extra expense is covered to the extent that it reduces the amount of loss that would have otherwise been payable. As such, if there is extra expense to replace the LKQ with new, and replacing it with new will shorten the time that the car wash is shut down and get the insured back up and operational sooner than waiting for the LKQ part, then that extra expense will be covered to the extent it reduces the business income total loss.