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An auto dealer is insured under a Business Income Coverage Form with Extra Expense, CP 00 30 10 90. Flood is included as an additional peril covered. The insured premises suffered a flood loss, and most of the inventory—new cars—was damaged.

Since more rain was predicted for the rest of the month, the insured decided to rent a new lot in a nonflooded area to accommodate a new shipment of cars. The flood water in the original location receded, and the lot was ready to be used, but the insured was afraid of a predicted secondary flood.

The insured wants to claim $100,000 for the rent of this new lot as an extra expense under the CP 00 30. What is your opinion?

Puerto Rico Subscriber

What you describe would not be covered as an extra expense. It does not appear that the extra lot minimized or avoided the business income loss. Also, it does not sound like the expense was incurred during the period of restoration. If the flood waters were still in place and renting the lot had enabled the cars to be delivered, then it may be considered an extra expense as it may have lessened the business income loss and allowed the auto dealer to stay open during the flood. But, if the lot was rented when the flood was already gone and the dealer could accept delivery of the vehicles at the original location, it does not meet the requirements to be a covered extra expense.

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