Which of the following is an example of a direct loss?

Which of the following is an example of a direct loss?

• A. Additional living expenses during repairs
• B. Legal fees incurred during litigation
• C. Physical damage to a building from a fire
• D. Lost profits while a business is closed for repairs

Answer: (C)

Physical damage to a building from a fire is considered a direct loss because it represents an immediate and tangible impact on the property itself. A direct loss refers to actual physical damage or destruction of property, which directly results from an event, such as a fire in this case. When the building sustains damage, the costs to repair or restore the property are directly tied to the incident that caused the loss, making it a straightforward example of direct loss. In contrast, additional living expenses during repairs, legal fees incurred during litigation, and lost profits while a business is closed for repairs are all categorized as indirect losses or consequential losses. These losses occur as a result of the direct loss but do not represent the physical damage to the property. They involve additional costs or lost income resulting from the primary event impacting the property. Therefore, they do not qualify as direct losses.

Physical damage to a building from a fire is considered a direct loss because it represents an immediate and tangible impact on the property itself. A direct loss refers to actual physical damage or destruction of property, which directly results from an event, such as a fire in this case. When the building sustains damage, the costs to repair or restore the property are directly tied to the incident that caused the loss, making it a straightforward example of direct loss.

In contrast, additional living expenses during repairs, legal fees incurred during litigation, and lost profits while a business is closed for repairs are all categorized as indirect losses or consequential losses. These losses occur as a result of the direct loss but do not represent the physical damage to the property. They involve additional costs or lost income resulting from the primary event impacting the property. Therefore, they do not qualify as direct losses.