I am involved with a dispute over one line item contained in CP 00 30 04 02, Business Income (and Extra Expense) Coverage form.

The dispute is based on the coinsurance application. Specifically, whether ordinary payroll should be included or excluded from the calculation of what the insured "should have" for insurance. The difference in the claim at hand is over $800,000 of expenses, which translates to a significant coinsurance penalty if applied.

The policy outlines that the coinsurance penalty is specified for a twelve-month period, based on the total of expected net income, plus all operating expenses, with certain items deducted. Section D. lists twelve specific expense items that are to be deducted from operating expenses, if applicable. The premise of excluding these expenses is obviously that they would not be incurred in the event of a twelve-month loss. They appear to be variable expenses that are tied to sales. Without sales, these expenses discontinue. Therefore, they could not be incurred and are not included in a calculation of the necessary limits for business income.