Changing lost status for checked out items, then wondering why the replacement price is not refunded is a common user error, and a source of a lot of trouble tickets.

Checking to see if an item is checked out, and displaying a warning if so, like

"It looks like you're trying to change the lost status on a checked out item -- this will not allow the replacement price to be refunded -- Do you wish to proceed? (Yes/No)"

Would cut down confusion and reduce work-flow issues.