Coverage Issues After Catastrophic Losses

The recent catastrophic warehouse fires in Indianapolis and Fort Wayne are a good occasion to consider what type of coverage is best on large, older industrial or commercial buildings that have useful purposes but may, in fact, be impossible or impractical to replace.  It is also a good time to think about what amount your insurance company may owe you for business interruption or business income loss where it is not possible to return to business in the location where the original facility was located.

Many small to medium business owners have Business Owners Policies (“BOPs”) that are sold on a standard form.  These policies typically include coverages for things like loss of electronic data processing equipment, business interruption and extra expense, and coverage for all major property and liability risks.  They are often sold with additional optional coverages or endorsements which modify the standard terms of the policy.  In the case of an older building that is more difficult to rebuild or replace, such policies may include extended business income coverage that could provide additional recovery for your business.  A BOP with replacement cost coverage covering a building that is incapable of being replaced may present difficulty in calculating the amount owed under the policy.

Some owners of older properties choose to insure them pursuant to “actual cash value” policies.  In that case, Indiana’s Broad Evidence Rule should be applied, and the fact-finder should consider “all available evidence logically tending to establish” actual cash value.  See, e.g., Ohio Cas. ins. Co. v. Ramsey, 439 N.E.2d 1162, 1168 (Ind.Ct.App. 1982).

If your business has suffered a catastrophic loss, or even a minor one, or if you simply want to review your coverage, it is advisable to speak with an attorney knowledgeable about these types of policies and the issues that often arise following a loss or claim.

For answers to these and related questions, call Michael Schultz at (317) 501-2233, or Jim Buddenbaum at (317) 439-1181.