API Practice Test & Exam Prep

A covered fire damages a store and forces it to close for two months. Which loss is most clearly an indirect loss?

The burned shelving The smoke-damaged inventory The lost business income during closure The cost to remove charred debris

Correct Answer:

The lost business income during closure

Explanation:

Lost business income results from the direct physical damage rather than being the physical damage itself, so it is an indirect or consequential loss.

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