Policyholder Pulse
A zero on a Statement of Values does not necessarily mean zero coverage. Yet after a major property loss, insurers often point to reported business interruption (BI) values as though they define—or cap—the coverage available at a particular location.
They often do not.
For many commercial property programs, the Statement of Values (SOV) is principally an underwriting tool. Unless the policy itself makes reported BI values scheduled limits, sublimits or valuation caps, the policy language—not the number entered on the SOV—should determine the scope and amount of coverage.
The SOV Is Not the Policy
After a significant property loss, insurers, adjusters and consultants frequently compare the claimed loss against the values reported for the affected location. That comparison can generate disputes involving omitted locations, replacement costs exceeding reported estimates, and BI losses greater than reported BI values.
But reported values should not automatically be treated as independent limitations on coverage.
State and federal courts have recognized that BI values stated on an SOV do not necessarily establish a location-specific cap. The critical question is whether the policy language expressly ties coverage or limits of liability to those scheduled values. Where it does not, the SOV generally should not displace the coverage provided by the policy itself.
Why Some Locations Have No Reported BI Value
The issue is particularly important for companies with multiple manufacturing, warehousing and distribution locations.
Business interruption insurance is designed to protect anticipated earnings lost because of a covered event. Those earnings exist once at the enterprise level; they do not multiply simply because a product passes through several facilities.
For that reason, a manufacturer may report anticipated revenue at its production facilities but not repeat the same revenue at warehouses and distribution centers. Reporting the identical revenue at every location through which a product passes could dramatically overstate the company’s total exposure, distort underwriting and potentially increase premiums.
A warehouse with a reported BI value of zero therefore may not reflect a judgment that disruption at that warehouse could never cause a business-income loss. It may simply reflect a sensible methodology designed to avoid double-counting revenue.
A Zero BI Value Does Not Automatically Mean Zero BI Coverage
Many commercial property policies provide BI coverage for losses resulting from direct physical loss or damage at covered locations. Recovery is then measured by the actual loss sustained—or by another formula specified in the policy.
Unless the policy says otherwise, that measure of recovery is not necessarily the number listed beside the damaged location on the SOV.
Accordingly, the absence of a separately reported BI value at a particular location does not necessarily mean that damage there cannot generate a covered BI loss. Nor does reporting BI values at one facility necessarily mean that only that facility can give rise to a BI claim.
Those questions should turn on the policy wording.
Why the Distinction Matters After a Loss
Suppose a warehouse suffers a major covered loss but carries no separately reported BI value. The insurer may argue that the policyholder itself acknowledged that the warehouse presented no interruption exposure and may attempt to deny or sharply restrict the resulting BI claim.
The policyholder may have a very different explanation: The SOV was prepared for underwriting purposes using a methodology intended to prevent the same anticipated revenue from being counted multiple times across the company’s supply chain.
If the insurer intended the SOV values to operate as location-specific coverage caps, the policy can say so.
Indeed, insurers know how to accomplish that result. Several decisions, including Core-Mark and Victory Container, involve policies containing occurrence-limit endorsements, margin clauses, scheduled limits, coinsurance provisions, or other language expressly connecting reported values to the amount recoverable. The absence of such language can be critical.
Read the SOV and the Policy Together
None of this means an SOV is irrelevant. Far from it. Statements of Values may be incorporated into a policy or affect premiums, valuation provisions, margin clauses, blanket limits, coinsurance calculations, scheduled limits, or coverage for newly acquired or unreported locations.
The point is narrower but important: An SOV should not be assumed to impose a coverage limitation that the policy itself does not impose.
Policyholders should therefore understand both how their BI values are developed and exactly how their policies use those values. That analysis should occur at placement and renewal—not for the first time after a major loss.
When a claim does occur, the question should begin with the policy language, not with a single number on a spreadsheet.