When Josephine's Business Owners Policy adjusts losses, what basis is used assuming no endorsements apply?

In the context of a Business Owners Policy (BOP), when adjusting losses, the standard basis used is Actual Cash Value (ACV). This means that the insurer calculates the value of a lost or damaged property by taking into account the replacement cost minus any depreciation that has occurred.

Using ACV aligns with the intent of BOP coverage, which typically provides a balance between protecting the insured's financial interests and managing the insurer's risks. The actual cash value reflects the current value of the property at the time of the loss, considering factors such as wear and tear, market conditions, and age of the asset.

In contrast, replacement cost would cover the full cost to replace the asset without deducting depreciation, but unless specifically stipulated in the policy via endorsements, this is not the default. Market value and depreciated value also differ from ACV, as market value is based on what the property would sell for in the current market, while depreciated value focuses solely on the reduction in value over time without linking it back to the replacement costs directly. Thus, ACV is the most appropriate method for loss adjustment in the absence of any additional endorsements.