Summer is officially over, but many folks around the country will glow year round with the help of some indoor rays and good Extra Expense Coverage.

On the issue of tanning beds and extra expense coverage, the FC&S Bulletin published the following:

Extra Expense for a Tanning Salon


The insured owns a tanning salon. He is insured on a standard commercial property form, with the CP 00 50 04 02, Extra Expense, endorsement. There is no business income endorsement. Many of his customers pre-pay for a number of sessions, or have monthly fees directly taken from their credit cards.

He suffered a covered loss in which four out of the seven beds were rendered unfit for use. In order to keep his business alive (particularly in the light of many customers having pre-paid), he contracted with another tanning salon for his customers to use the other salon’s tanning beds. He paid the other salon $8 per person/per session, which is what his customers paid.

When he submitted this expense to the insurance carrier, however, the claim was denied. The adjuster stated this was a business income loss and not covered. May we have your opinion?

Pennsylvania Subscriber


The extra expense coverage form states "extra expense" means "necessary expenses you incur during the ‘period of restoration’ that you would not have incurred if there had been no direct physical loss or damage to property." These extra expenses include those "to avoid or minimize the suspension of business and to continue ‘operations’ at the described premises, or at replacement premises or at temporary locations."

Since the insured has, through contracting with another tanning salon to serve his customers, incurred expenses he would not otherwise have had, there is coverage. He has minimized the suspension of business through this arrangement. Further, the endorsement does not state the insured must own, rent, or lease the "replacement premises," so the use of the other tanning salon becomes the insured’s business’s "temporary location."

Other popular “extra expenses” could be temporary office space, temporary computer systems or furniture for the temporary space, overtime for workers who need to spend additional time outside of their normal workday due to the covered event. If employees were not able to bring their lunch to work because the employee’s lounge/kitchenette was burned in a fire, an extra expense claim could be made for feeding them during this time period.

For example, in Cotton Bros. Banking v. Industrial Risk Insurers, 951 F.2d 54 (5th Cir. 1992), the court granted coverage for security expenses to avoid theft of a damaged business property. Also, in Northwestern States Portland Cement Co. v. Hartford Fire Ins. Co., 360 F.2d 531 (8th Cir. 1996), under a business interruption endorsement containing an "extra expense" clause, the insured was able to avoid a loss of earnings by using available raw materials to continue production; the extra cost involved in producing replacement raw materials was recoverable, although the total cost of such materials was not.

It is also important to note that, as with most insurance policies, the insured has a duty to mitigate its damages after the loss and that Extra Expense Coverage allows the insured to recover a measure of the incidental costs expended in trying to mitigate damages pursuant to the terms and provisions of most insurance policies.