The ISO Building and Personal Property Coverage Form values an insured’s stock at ACV, unless Stock is listed on the declarations. This is not often a problem, since typically there is not much difference between ACV and RCV for a newly manufactured item.
Even if Stock is shown on the dec page, the coverage is for:
- cost of raw materials
- labor put into the Stock
- overhead expenses
The sharp-eyed reader will see that the additional value of markup or profit margin is not included when the insurer covers a claim.
The exception to this type of valuation is when Stock has already been sold, but has not yet been delivered. In that case, Stock is valued at the selling price, less discounts and expenses the insured would ordinarily have (see Loss Condition 7. Valuation c.).
So how do we get coverage for Stock that was sitting in the warehouse at the time of the claim, ready to go but not yet sold? ISO has an endorsement, CP 99 30, called Manufacturers Selling Price. It applies the Loss Condition noted above to all “finished ‘stock.’” This results in covering the profit margin. Note that this applies only to finished Stock which is ready for sale, not to goods in-process or raw materials.
Do your validating producers understand coverage of stock, or know where to learn about it? Insurance Technical Consulting specializes in one-on-one mentoring of commercial producers so they gain confidence in what they are selling and make fewer errors. Save your agency time with potential to increase revenue and reduce E&O costs. Explore the website at InsuranceTechnicalConsulting.com for more information.
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