Unique Property Provision Aids Client

Those of us who work with Property policies are familiar with the fact that all such policies written on a "Replacement Cost" basis provide that the policy will pay the cost to repair or replace (whichever is less), but also contain a provision stating that, if the Insured doesn't acutally repair or replace the structure or equipment, only the Actual Cast Value (ACV) will be paid by the policy.

One of our largest clients sustained serious fire losses to two pieces of contractor's equipment at different locations.  Although the losses occurred within a span of less that two weeks, they were unrelated.  Each loss was subject to a $100,000 deductible. The ACV of one of the pieces was below the deductible, while the other was only $19,500 in excess of the deductible.

Primarily because of age and poor condition, the Insured had decided not to repair either piece of equipment, and was expecting a $19,500 ACV settlement for both losses.  After a careful review of the Property policy, we found a unique provision which we felt might possibly enhance our client's loss recovery.

The Property Policy said that, in cases where the Insured elects not to repair the damaged property, if the Insured, within two years of the loss, produces evidence of a "Capital Expenditure" equal to or exceeding the Repair Cost of the loss, the policy will settle the loss on the basis of full Repair Cost (not just ACV).  This is provided that the Insured can demonstrate that the Capital Expenditure was unplanned as of the date of the loss, the purchase was related to the Insured's operations and the purchase was made at an "Insured Location" under the policy.  We also clarified that "Capital Expenditure" wasn't restricted to another piece of equipment and could also include buildings.  The carrier's adjuster wasn't familiar with this provision in the insurance policy.

We advised our client that this unique option was available and they were ultimately able to provide the carrier with the necessary documentation to satisfy the requirements of the Capital Expenditure provision.  Instead of a $19,500 ACV recovery, the Insured collected over $400,000 after deductibles.

Can You Insure Against the Weather?

A non profit entertainment client experiences peak attendance at the end of its calendar based fiscal year.  Adverse weather conditions can dramatically reduce attendance and consequently hurt our client's revenue.  This non profit struggles to maintain a positive net income each year.  If adverse weather occurs in the last week of the year, our client does not have the ability to adjust expenses to offset the revenue reduction and therefore may show a net loss for the year.

Cohen-Seltzer obtained quotes for a variety of adverse weather conditions and volumes - i.e. a state of emergency declaration, three or six inches of snow, etc.  The client purchased coverage for six inches of snow for a premium of $4,500.  It snowed on one of the covered dates and the client received a claim payment of $38,000 thereby enhancing their revenues and ensuring a positive net income for the year.