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What is a Selling Price Clause? A Comprehensive Legal Overview
Definition & Meaning
A selling price clause is a provision in property insurance that allows businesses to receive compensation based on the market value of their products that are damaged, rather than just their production cost. This clause bridges the gap between actual cash value coverage, which only pays the cost to the insured, and business interruption insurance. It is particularly beneficial for manufacturers, as it covers the full cost of finished goods. However, for mercantile firms, this clause only applies to goods that have been sold but not yet delivered to customers.
Table of content
Legal Use & context
The selling price clause is commonly used in property insurance contracts. It is relevant in areas of law related to business and commercial insurance. Businesses may utilize this clause to ensure they are adequately compensated for their inventory in the event of a loss. Users can manage related forms and documents through resources like US Legal Forms, which offers templates drafted by legal professionals.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A manufacturer has a warehouse of finished electronics that are damaged in a fire. With a selling price clause, they can claim the market value of those electronics rather than just the cost to produce them.
Example 2: A clothing retailer has sold items online that have not yet been shipped. If those items are damaged before delivery, the retailer can claim their selling price under the clause. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Variations
California
Generally allows selling price clauses in property insurance.
New York
May have specific regulations governing the application of selling price clauses.
Texas
Commonly used in commercial insurance policies.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Actual Cash Value
Compensation based on the replacement cost minus depreciation.
Does not consider market value; only production cost.
Business Interruption Insurance
Covers loss of income due to business disruptions.
Focuses on income loss rather than product value.
Common misunderstandings
What to do if this term applies to you
If you are a business owner and this term applies to your situation, review your insurance policy to ensure it includes a selling price clause. If it does not, consider discussing this coverage option with your insurance provider. You may also explore US Legal Forms for templates that can assist you in documenting your insurance needs. For complex situations, consulting a legal professional may be beneficial.
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Applicable To: Finished goods, sold but undelivered items
Benefits: Market value compensation
Common Users: Manufacturers, retailers
Key takeaways
Frequently asked questions
A selling price clause is a provision in property insurance that allows businesses to claim the market value of damaged goods instead of just their production cost.
Manufacturers and retailers, particularly those with goods sold but not yet delivered, benefit from this clause.
Actual cash value only compensates for the cost to produce items, while a selling price clause considers the market value.
Yes, the application and regulations can vary by state, so it's important to consult local laws.
Review your insurance policy and discuss options with your provider. Consider using legal templates for documentation.