Debris Removal Coverage
and Coinsurance Provision

Q

I'm adjusting a loss on a property that is insured on an ISO commercial property form CP 00 10 04 02. The loss includes a building debris settlement. The property was underinsured, so there is a coinsurance penalty on the direct property loss settlement. Should I apply the same coinsurance penalty to the debris removal payment?

Ohio Subscriber

A

You should not apply a direct coinsurance penalty to the debris removal settlement. However, an indirect penalty is applied when the property is underinsured because the debris removal clause provides for up to 25 percent of the amount paid for the direct loss, not 25 percent of the amount insured. Therefore, if a coinsurance penalty was applied to the direct loss settlement, the debris removal amount would be 25 percent of an already penalized amount.

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