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The Effect of the Sale of a Commercial Property on a Pending Insurance Claim

A D J U S T I N G T O D A Y assignor, and no more. 12 The as- signee, Bronx Entertainment, how- ever, attempted to assert not only the pre-sale BI losses of Family Golf, but its own post-sale BI losses. The court ruled, of course, that Bronx Entertainment, as assignee, could not assert its own BI losses. 13 In this regard, the court cited to and relied upon the superseded, earlier BA Properties ruling. Most importantly, the Bronx Entertainment court did not actually rule that the purchaser, as assignee, could not assert the rights of the seller/assignor , nor that the seller could not have held onto its own rights and made a claim for its own full BI losses, including beyond the sale date. 14 Of course, calculating a theoreti- cal BI loss beyond a sale date can be complex, given the absence of actual figures in the hands of the seller/policyholder, especially as to an extended BI period where the offset from actual sales may be unknown. The ultimate practical effect of a sale on the BI claim may be more in the matter of proof, since the claim could become more specu- lative. Sellers that do not assign claims are advised to confirm the purchaser’s cooperation in supply- ing information to assist with the insurance claim. B.Unrepaired Property To the extent that the Seller has already incurred repair or re- placement costs, such costs are reimbursable under the policy. If there are certain permanent or other repairs estimated but yet to be made, those estimated costs re- main recoverable notwithstanding a sale. There generally are four op- tions for adjustment on the prop- erty side, the “lesser” of which the seller is entitled to under a typical policy: 1. Receive cost for actual repair or replacement at the same site (new materials of like size, kind and quality). 2. Receive the same repair or re- placement cost value (RCV) ap- plied to another site , but not to exceed costs that would have applied to the damaged site. 3. Receive the same RCV applied neither to the same nor another site, if the proceeds of such loss settlement are expended on other capital expenditures related to the Insured’s opera- tions “within two years from the date of the loss.” Any such expenditure must not have been planned as of the date of the loss and must be made at a loca- tion insured under the policy. 4. Receive Actual Cash Value (ACV). Many policies require such an election be made within a “rea- sonable” time period or at least two years from the date of loss. Thus, by the express terms of a typical policy, if there are repair or replacement costs yet to be expended at the actual site, they remain collectible after a sale from 14 Likewise, in Holt v. Fidelity Phoenix Fire Ins. Co. , 76 N.Y.S.2d 398, 400 (3d Dep’t 1948), the court ruled that an assignee could not recover for its own business interruption loss, but noted that had the seller “not already been paid for its own losses,” it could have recovered BI past the sale date or as- signed to the purchaser such claim to recover the seller’s BI losses. Another off-point case is SR International Business Ins. Co. Ltd. v. World Trade Center Prop- erties, LLC et al. , 394 F.Supp.2d 585 (S.D.N.Y. 2005), which also dealt with the issue of whether an assignee could assert its own ongoing rental income losses. The court held that an assignee can assert its own ongoing rental income losses (and did not reach the issue of whether the assignee could assert its own ongoing BI loss). With respect to the issue of whether the seller/policyholder , having not assigned its claims, can recover for the full “theoretical” BI loss past the sale date, there is only one court that to date has ruled on that issue, and for the policyholder – BA Properties . If there are certain permanent or other repairs estimated but yet to be made, those estimated costs remain recoverable notwithstanding a sale.

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