The Dec Page question of the month deals with how a net operating loss affects a business income loss assessment. Business income coverage is aimed at allowing the insured to realize the net profit that would have been earned had the business interruption not incurred. However, what if the insured would not have had a net profit; that is, what if the expenses prior to the business interruption loss would not have been covered by earnings? The insured was operating at a loss and not earning a profit, so what can the insured recover under his business income coverage? For the answer to these questions and for court cases pertaining to the issue, link onto the designated article in the FC&S Bulletins.

A case from Arizona pertaining to worker comp coverage and the issue of whether the use of illegal drugs prevents that coverage is presented. The Arizona legislature had passed a law that provided that a worker who tests positive for alcohol or illegal drugs would not be eligible for workers compensation benefits. This law was challenged and the Arizona Supreme Court had to weigh the statute against the state constitution to decide the outcome. Also in the Dec Page is an extensive examination of the homeowners loss of use provision. This is relevant today due to the hurricane damage in New Orleans and Mississippi which led officials to prohibit homeowners in many instances from staying in or returning to their homes. Homeowners policy language and several court cases are cited in an attempt to understand how the homeowners policy handles such forced loss of use.

Questions and Answers

A small motel provides toiletry items for its guests. Can the additional insured—vendor endorsement cover this exposure? See Vendor Coverage for Distributor?. The insured's product's incorporation into another's product causes that product to become unusable. Is there coverage? See Profit Loss and Loss of Sales Covered as Property Damage?.

A subcontractor accidentally hammers nails into radiant heating pipes while nailing down flooring. Will the CGL respond? See Damage to Property Exclusion Applies to Undamaged Flooring?. Does the PAP cover medical payments for a go-cart accident? See “Hurricane Damage and Business Income Loss”, Personal Lines Volume, Q&A section. We also address a question concerning coverage under a personal auto policy (PAP). See Mechanical Breakdown Following a Collision.

Finally, a question as to what constitutes the “body of water” referred to in the homeowners water damage exclusion. See “Body of Water” and Damage to Dwelling.

Unraveling Insurance Coverage for Hurricane Katrina

Mr. Randy Maniloff, an attorney and frequent writer for FC&S Bulletins, has authored an article on the insurance coverage issues that will arise due to the havoc wreaked by Hurricane Katrina. Property losses and business interruption losses due to a wide variety of causes of loss may very well be centers of dispute between insurer and insured over the next few years. This article offers a solid discussion of the coverage disputes and court resolutions that are the result of hurricane damage due to wind, rain, and flood. See Unraveling Insurance Coverage for Hurricane Katrina.

Internet Liability and Network Protection Coverage

The Insurance Services Office (ISO) has developed an e-commerce program providing coverage for cyber risks. There are five insuring agreements under the coverage form: web site publishing liability; network security liability; replacement or restoration of electronic data; cyber extortion; and business income and extra expense. The article summarizes the insuring agreements, the exclusions, and the definitions that are part of this new e-commerce coverage. Endorsements that can be used with the coverage form are also noted. See Internet Liability and Network Protection Policy.

Personal Auto Policy

We continue our discussion of the ISO 2005 personal auto policy (PAP). This month, we discuss Part D-Coverage for Damage to Your Auto. In particular, we note the changes ISO has made reflecting the common presence in current autos of equipment such as built-in GPS systems. See Personal Auto Policy—Part A for a discussion.