A consequential loss is an indirect adverse impact caused by damage to business property or equipment. Scott C. Turner, Insurance Coverage of Construction Disputes § 6:22 (2d ed.). This is one of a series of articles originally published in Mealey’s Litigation Report: Insurance Bad Faith, Vol. Think of it as a ripple effect. This may vary under non-ISO forms and some states have laws that govern "mismatched" repaired property. It covers in a variety of situations if you’re held responsible for bodily injury, property damage, or personal injury. A: Assuming an ISO HO policy, the policy only covers DIRECT damage to property, not indirect or consequential damage such as a loss in market value due to the appearance of a mix of new and old siding after the repair. The notion that the insurance company should have to pay the fees associated with properly adjusting an insured loss is not a new idea. Consequential Loss Insurance: Coverage, Claim & Exclusions Updated: 01-10-2019 11:44:46 AM An incident of fire has the potential to not only damage the goods and machinery, but also impact the projects in pipeline and in hand. It is merely a straightforward application of the common law doctrine of consequential damages. Consequential losses can result in substantial amounts of lost revenue. For example, if a tornado damages a flower shop, the owners would most likely lose revenue due to the fact that the building needs repairs. However, the policy doesn’t cover the consequential loss/expense of replacing the entire roof since the remaining shingles have not been damaged by other than normal wear and tear which is excluded elsewhere in the policy. A waiver of consequential damages provision, such as that found in Section 8.1.3 of AIA Document B101-2017 Standard Form of Agreement Between Owner and Architect, waives only the owner’s right to claim those damages said to flow indirectly from your wrongful acts or breaches of contract (e.g. The few courts that have upheld denials of coverage for consequential damages have … Tiffany Tower filed suit for breach of contract and for consequential damages for breach of the implied covenant of good faith and fair dealing. (6) The purpose of consequential damages is to place the insured in the position that it would have been in had the insurance contract been performed. Umbrella policies can cover what primary insurance excludes and/or additional coverage beyond the limits set in your other insurance. For example, if a car’s fan blade breaks off and damages the radiator to such an extent that the engine overheats, the damage to the radiator and engine is consequential damage. However, it does seem that there is a movement to cover some of these losses. Consequential damages to common areas and unit owners’ property in a condominium complex that result from a subcontractor’s defective work constitute both “property damage” and an “occurrence” pursuant to the plain meaning interpretation of the terms as defined in the Insurance Services Office, Inc.’s (ISO) 1986 standard CGL form. Consequential damage is included under comprehensive cover and is damage resulting from other damage. This means that you’re found at fault or negligent for someone else’s injury or damage. Insurance policies do exist to cover consequential losses however. What is consequential damage? consequential damages are damages that do not arise directly from the breach, but are recoverable in limited circumstances. Consequential damages is defined by the Pattern Jury Charge as: The limits set in your other insurance not arise directly from the breach, but are recoverable in limited.. 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