The sweatshirts in question were goods in process and not finished stock, because they did not yet have the Superbowl teams' logos silk-screened onto them. As such, the lost sweatshirts were not eligible to be valued according to the manufacturer's selling price (finished “stock” only) endorsement (CP 99 30 06 95). However, coverage is available under the business income form.

If the blank sweatshirts were finished stock, there would be no dispute that they are covered under the building and personal property form and subject to being valued according to the manufacturer's selling price endorsement. This result is accomplished by a business income exclusion found in the causes of loss form that excludes business income coverage for “[a]ny loss caused by or resulting from: (a) Damage or destruction of 'finished stock'; or (b) The time required to reproduce 'finished stock.'” This exclusion puts coverage for lost income and profit from damage to finished stock under the personal property form and the manufacturer's selling price endorsement.

The insured is in no way harmed by covering the loss under the business income form. That form is designed to insure the income and profit to be derived from goods that are still in the process of being manufactured. This is the same lost income and profit that would be covered by the manufacturer's selling price endorsement. Of course, the business income form will not cover the cost of silk-screening, since this was left undone.

It is understandable that the insured wanted the lost income and profit covered under the manufacturer's selling price endorsement rather than the business income form. Settling a business income loss lends itself to a more uncertain outcome than settling a direct property loss. The amount of a direct property loss can be ascertained relatively easily by establishing the replacement cost of the damaged property (and adjusting for actual cash value, if necessary). The manufacturer's selling price endorsement for finished stock helps make the process easier. On the other hand, a business income loss requires the insured to establish, to the satisfaction of the adjuster, what his income and profit would have been had there been no loss. It is one party's estimate set against another's. This leads to a negotiated settlement, with the outcome depending on which side is the better negotiator.

In this case, however, there is another solution. Lost income and profits coverage is also available under the building and personal property form because the blank sweatshirts had been presold. The building and personal property form's valuation clause says that “stock” that is sold but not delivered at the time of the loss should be valued at selling price, less discounts and expenses not yet incurred. “Stock” is defined in the form to include raw materials, goods in process, and finished goods. The definition provides selling cost coverage (less the expense of processes that have not been applied to them) for goods that are in process and destined to become the stock that was sold but not delivered. (Remember, the manufacturer's selling price endorsement applies to all manufactured finished stock, whether sold or unsold, so the definition in the building form and the endorsement overlap only with respect to finished stock that is sold but not delivered.)

Because the blank sweatshirts are categorized as goods in process that were sold but not delivered, there is overlapping coverage under the business income form and the building and personal property form. Either coverage arrangement covers lost income and profit arising from a covered loss. It is up to the insured to choose the settlement that is most to his benefit.