Overhead and Profit: Its Place in a Property Insurance Claim


...overhead and profit associated with its construction.

Because some of that value is left at the time of the loss, the loss of that value is, in fact, part of the damage suffered by the insured. A claims practice of excluding, deducting or withholding the costs of GCO&P in these calculations clearly violates the principle of indemnity. Specifically, insureds are not being compensated for the value included in that portion of the general contractor overhead and profit when the property was first constructed.


The inclusion of GCO&P in ACV payments is pervasive and traditional to the insurance industry. Numerous courts of law, the Texas and Colorado departments of insurance and widely accepted insurance publications all acknowledge this fact. They clearly recognize the need to include these expenses in situations where the insured is reasonably likely to incur such costs in repairing or replacing their loss.

Although many insurers routinely pay for GCO&P if more than three trade categories of specialty contractors/subcontractors are needed, a strong argument can be made for including the costs of CGO&P in every loss when the replacement cost less depreciation rule is used. At the very least, insureds should receive some compensation for the time spent and the expense incurred while acting as their own general contractor in losses where the services of a general contractor normally would not be utilized.

Edward Eshoo Jr. Esq.

Edward Eshoo Jr. Esq., is a founding partner of Childress Duffy Goldblatt, Ltd. in Chicago, where his areas of practice include insurance coverage, insurance producer malpractice, water damage and mold litigation, commercial litigation, and construction defect litigation. For more than two decades, he has lectured on insurance-related topics and has authored articles and publications on first-party property insurance issues.

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