Story of use and occupancy;

              74 HASKINS & SELLS October
A Story of Use and Occupancy
INSURANCE is usually associated with
fires, thefts, accidents, and deaths.
But of late years, and particularly the last
two or three, there has come into some
vogue a form of insurance known as Use
and Occupancy. The term is somewhat
ambiguous to the uninitiated, but is used
to denote insurance against loss of profit
through business interruption resulting
from fire; in short, business interruption
insurance. It is separate and distinct from
property loss insurance, and like the latter
may be covered by an adjustable or by a
valued policy. Under the valued form of
policy the assured pays a higher rate of
premium, but in settlement receives the
amount of the insurance carried regardless
of the actual loss. Probably most of the
use and occupancy policies carried at
present, however, are on an adjustable
basis as a result of which the loss sustained
by fire has to be determined.
Property loss settlements are now made
with comparative ease from reports pre­pared
by adjusters who fix the amounts, if
at times somewhat arbitrarily, from quan­tities
actually determined or estimated,
prices, supposed to represent replacement
values, and in some cases with an addi­tional
allowance for expenses related to the
physical property destroyed. The method
has become more or less standardized and
permits of little practical controversy.
Use and occupancy settlements present
more of a problem in that the form of in­surance
is relatively new. Methods of
arriving at the amount of loss have not
yet been developed because of the meagre
experience available on which to base
methods, and further, because the deter­mination
of the amount lost by the assured
requires reference to the books and records
and is subject to involvement through the
many accounting questions which invari­ably
arise. Briefly, use and occupancy
settlements are largely a matter of ac­counting.
A recent case of use and occupancy in­surance
is of more than passing interest
because of the fact that two firms of
accountants were retained to determine
the amount of loss; one firm by the as­sured,
the other by the underwriters. Fail­ing
to agree on the amount of loss the two
firms, under authority of an appraisal
agreement to which their principals became
parties, called in a third party to act as
umpire in the dispute. This case is
thought to be one of the first of its kind
to go to arbitration and illustrates what
may be accomplished by this method,
particularly where the questions are those
of accounting and are submitted to an
accountant, since in this case the findings