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Home / Insurance / Where did the term “physical” come from in corporate revenue form policies? | Property Insurance Law Team Blog

Where did the term “physical” come from in corporate revenue form policies? | Property Insurance Law Team Blog



The litigation over lost revenue to companies caused by Covid-19 has been going on for three years. A new article on team review1 provides a good summary of this litigation and arguments for coverage from the policyholder’s point of view.

An important part of the article was when the term “physical” was placed in the business revenue section of ISO policies:

Until the mid-1980s, most insurance companies used a standard trigger for corporate income that required “damage” or “destruction” of property. The term “loss” is used only with reference to the amount owed by the insurance company. In the mid-1

980s, however, the Insurance Services Office (‘ISO’), the primary property organization for property insurance companies, changed the triggering of its standard policies to “direct physical loss of or damage to” property. ISO made this change to make it clear that a standard property insurance policy did not require significant “damage or destruction” of property, but instead extended coverage to things like “theft” where a physical force interferes with a property right or use. This change was in line with US case law, which had already interpreted “physical loss” in this way in non-ISO forms.

All insurance cases begin with the wording of the police. Knowing the history of why that wording was placed in insurance can help with the understanding of insurance coverage.

Today’s thoughts

History never looks like history when you go through it.
—John W. Gardner
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1 Charles M. Miller, Richard P. Lewis and Chris Kozak. Covid-19 and business income insurance: the story of “physical loss” and what insurers intended it to mean. 57 Damages, litigation and ins. Prac. LJ ___ (coming 2022).


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