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August 14, 2015  

 
 Q&A of the Week

Tenant's Use Interest Explained

A New York subscriber recently asked the following question:

A tenant in a building installs $1,000,000 of improvements and betterments at the tenant's expense. The CP 00 10 form provides insurance for the "use interest as tenant in improvements and betterments." Please explain the meaning of "use interest."

Also, what prevents the building owner from also making a claim under the building policy for loss to these improvements and betterments installed at the tenant's expense, as it appears the improvements and betterments are included in the definition of "building"?

ANSWER: Generally, when a tenant makes an improvement to leased property–such as adding a new store front–the actual improvement reverts to the building owner and the tenant's interest in the improvement is using it during the leased period; thus, "use interest." Depending on who restores the improvement, the CP 00 10 provides different methods of recovery. If the tenant promptly repairs or replaces the damaged improvement, recovery is actual cash value, as if the insured owned the improvement. If the landlord pays to restore the damaged improvement, the tenant recovers nothing. If the improvement is not promptly repaired or replaced, the tenant recovers a proportion of the original cost of the improvement.

So, if the landlord actually makes the repairs, he is entitled to recover under his building policy. Read More

 
 What's New This Week in FC&S

Droughts and Insurance

In 2015, California and other western states faced severe droughts, with many areas experiencing extreme or even exceptional droughts. As of August 4 California has declared a state of emergency and a blaze north of San Francisco is reported to be at historic proportions. Read More

 
 Litigation Watch
Technology Errors and Omissions Liability Coverage

The cyber liability insurer brought an action against the insured seeking a declaratory judgment that the insurer had no duty to defend the insured for claims arising from the insured's refusal to return electronic data to its customer. This case is Travelers Property Casualty Company v. Federal Recovery Services, 2015 WL 2201797.

Federal Recovery Services is in the business of providing processing, storage, transmission, and other handling of electronic data for its customers. One of the customers, Global Fitness, entered into a servicing retail installment agreement with Federal to process member accounts and transfer the members' fees to Global Fitness. Later, Global Fitness informed Federal that it was transferring its business to another company and requested Federal to return the member accounts data.
Read More
   
 FC&S Ask the Experts
Did you realize that the Q&A section of FC&S is made up of questions submitted by subscribers like you?

Paid subscribers to FC&S Online or print FC&S Bulletins are invited to submit insurance coverage questions to the editors. We'll provide a personalized opinion within five business days. (We'll let you know if it will be longer than that. Sometimes we have to gather research or other supporting materials).

Who knows? Your question may be featured (anonymously) in the online Q&A of the Week or as an FC&S update.

Submit your coverage interpretation question right to the editors of FC&S for quick and reliable information. Ask our expert staff a question by clicking here.
 
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The Zalma Insurance Claims Library
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FC&S Team
Kelly Maheu, J.D.
Publisher
  Diane W. Richardson, CPCU
Consulting Editor
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Managing Editor, FC&S
  Diana B. Reitz, CPCU, AAI
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Barry Zalma, Esq., CFE
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  Donna Cozatchy
Creative Director

 
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