Article List

Posted on 1/2/2012 by Administrator Account
Posted on 1/2/2012 by Administrator Account
Posted on 1/1/2012 by Administrator Account
Posted on 1/1/2012 by SuperUser Account
Posted on 12/31/2011 by Administrator Account
Posted on 12/30/2011 by Administrator Account
Posted on 12/29/2011 by Administrator Account
Posted on 12/29/2011 by Administrator Account

Limits of Loss Payment on and Extra Expense Form

Posted on 1/1/2012 by SuperUser Account

Extra Expense Insurance is one of the first claims that an insured will submit following a covered property loss. Extra Expense pays for the additional expenses the insured incurs in order to survive a loss or necessary expenses you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss or damage to property.

Extra Expense Insurance is one of the first claims that an insured will submit following a covered property loss. Extra Expense pays for the additional expenses the insured incurs in order to survive a loss or necessary expenses you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss or damage to property.

There are two basic ways that Extra Expense Insurance can be provided. Extra Expense can be written as a separate Coverage Form or it can be provided in combination with Business Income Insurance. The most common way to provide Extra Expense is in combination. One of the advantages of the combination form is that it does not have "Limits on Loss Payment" which has often been referred to as the 40/80/100 clause. The 40/80/100 percentages used to be included within the form language but more recent forms refer back to whatever percentages are included on the Declarations Page. The Limit on Loss Payments are often confusing. The ISO form states:
"We will not pay more for Extra Expense than the percentages shown in the Declarations times the Limit of Insurance."

When the "period of restoration" is:

a. 30 days or less, the first percentage applies

b. 60 days or less, but more than 30 days, the second percentage applies

c. More than 60 days, the third percentage applies

Using the 40/80/100 as percentages applicable, on first read the policy appears to be saying that the most an insured can collect the first month of their loss is 40% of the limit.  Reading more closely, that is not what the form says at all.  It says when the period of restoration is less than 30 days then the insured can only collect the 40%.  Stated differently, if the insured's loss lasts more than sixty days to repair or replace so that the insured is operational, then the insured is entitled to 100% of the amount of Extra Expense loss they are able to prove.  The intent of the limits of loss payment is to limit the amount of Extra Expense if the loss is minor in nature.

WSC_CommentIt