Loss of Use Part of Property Damage Claim

Our insured is a contractor who was hired to do some road work for a municipality. While grading an area near a railroad track, one of our insured's bulldozers accidentally hit a train boxcar and damaged the car quite a bit. We don't see any problem with paying for the actual damage to the boxcar, but the railroad is also making a claim for loss of use. Since the boxcar was just sitting on the tracks and was not being used at the time of the accident, is the railroad entitled to payment for its loss of use claim?

Ohio Subscriber

This accident resulted in property damage being caused to the boxcar, which you agree should be paid. The definition of property damage on every standard liability insurance policy includes resulting loss of use of the damaged property. Loss of use has been an integral part of property damage liability coverage for at least 30 years and has always been paid by insurers as part of a covered property damage claim.

However, it is up to the claimant to prove that he has suffered a loss of use due to the damage to his property. For example, if the insured is liable for damaging a taxi in an auto accident, the insured's auto policy would pay for the direct damage to the taxi and also pay for the amount of income lost by the taxi driver while the taxi is being repaired, the loss of use payment. The taxi driver would have to show what amounts of income he lost due to the damage to his taxi and its subsequent loss of use. If the claimant can show he has suffered a loss of income due to loss of use, that amount is to be included in the property damage claim.

The insured or his insurer can counter the claimant's loss of use claim through a show of mitigating circumstances. Using the example of the taxi loss in the previous paragraph, if the taxi driver claims he lost $500 a week due to loss of use, but the insurer can prove that the taxi driver only made $300 a week at the most, this is a mitigating factor and will result in the insurer paying the lesser of the loss of use amounts. Similarly, if the insurer can show that the claimant would not have suffered any loss of use due to the property damage caused by the insured, the loss of use claim will not be paid.

So, in this instance of the accident of the train with the road grader, the loss of use claim is part of the property damage claim and is compensable if the claimant can show an actual loss of use.

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