I have a question regarding whether a loss is settled actual cash value or replacement cost. We have a client written on a Businessowners form, BP 00 02 01 87. The form provides $20,000 for business personal property with replacement cost coverage. The policy also contains an endorsement—a small tool floater for $5,000.

Our client's tools were in a company truck, at the premises, when the truck was stolen. The truck was recovered, but the tools were not.

The dec page shows business personal property with replacement cost valuation and tools as actual cash value valuation.

The adjuster wants to pay actual cash value for the tools, but we contend it should be replacement cost. The adjuster agrees that if the floater was not on the policy that she would have paid the tools under business personal property with replacement cost coverage, but since there is a floater and the dec page states actual cash value, it will be actual cash value.

I believe that the endorsement, by definition, makes the tools become business personal property, subject to replacement cost settlement. It does not seem logical that we would charge the client an additional premium that takes away coverage.

What do you think? How should this be settled?

Indiana Subscriber

While the tools could have been considered business personal property under the policy without the endorsement, the endorsement specifically schedules tools. An endorsement to a policy takes precedence over the policy. So, the terms and conditions of the endorsement apply to tools before the policy terms and conditions. The dec page confirms that tools are scheduled with a $5,000 limit and shows that the tools are valued at actual cash value.

Paragraph A.1. of the endorsement replaces the business personal property section of the Businessowners form. Here, the endorsement is limiting coverage only to the items scheduled and deleting all the other items listed on the Businessowners form from coverage on this endorsement. So, yes, the tools are listed as business personal property, but they are still subject to the terms of the endorsement and the valuation method listed on the dec page.

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