City Parking Garage (CPG) is insured under a Business Income (and Extra Expense) Coverage Form with a limit of $1 million and 70% coinsurance. Ten months into the policy period, CPG's garage is damaged by earthquake, a covered cause of loss under CPG's policy. Repair of the garage will take four months, during which time CPG will sustain a business income loss of $680,000. CPG's net income and operating
expenses for the twelve months following policy inception (minus those expenses that can be excluded for coinsurance purposes) would have been $2 million.
b. How much will CPG be able to recover under its policy for the loss described?
b. ($1,000,000/$1,400,000) x $680,000 = $485,714