Which of these would most likely be classified as direct losses?

The most appropriate classification for direct losses is physical damage to property. Direct losses refer to immediate, tangible damages that occur as a result of an event or incident, such as a disaster. When property is physically damaged, such as in a fire, flood, or explosion, the costs associated with repairing or replacing that property are considered direct losses. This type of loss is straightforward to assess since it involves concrete damage to the insured property itself.

In contrast, the other options represent types of losses that are not direct but are typically seen as consequential or indirect losses. For example, loss of potential income due to a disaster stems from the interruption of business operations, which is an indirect consequence of the physical damage. Similarly, costs associated with legal defense arise from disputes related to the loss rather than from the loss itself, making them indirect as well. Loss of customer goodwill also reflects the impact of the disaster on a business's reputation and customer relationships, which is again a secondary effect rather than a direct loss to the property itself.