Insurers are often quick to call foul while handling business income claims. I found an interesting article in the FC&S Bulletin that illustrates the riddles a business income claim may present and how an insurer can avoid unnecessary disputes with a more thoughtful approach in its claims handling practices.
Contractor’s Profit Where the Insured Performs Repair
I insure a company that owns a dry dock that was damaged when a boat tipped onto it. The dry dock owner hired its sister company, a ship builder, to repair the dock.
The insurer is deducting the sister company’s profit margin for the repairs on the basis that an insured cannot profit from its own loss. The policy covering this loss is an ISO commercial property policy form CP 00 10. These two companies are completely separate from one another, so I don’t believe the insurer can arbitrarily deduct the ship builder’s profit margin. What do you think?
The insurer should include the ship builder’s profit margin in the loss settlement.
We hold that insurance covers the cost of a contractor’s professional services and profit in a repair job of any magnitude. That the contractor may also be an insured does no disservice to the principle of indemnification. That principle has it that an insured may not profit from his loss. That does not mean an insured may not profit from his work.
In the situation you describe, the ship builder is not even the claimant. It is a separate company from the claimant.