Welcome to the Autumn edition of Claim Solutions’ Newsletter.
This past quarter saw yet more storm damage in Melbourne and Queensland which created an enormous volume of claim activity for us all.
A mini cyclone even hit a well known theme park on the Gold Coast interrupting rides and leaving patrons on the chair lift unexpectedly trapped!
Other losses tracked since 1 January 2004 include fires, embezzlement, explosions and machinery breakdown. A list of these appears on page 4 of this Newsletter highlighting the need for adequate insurance cover.
We hope that all those who have sustained losses have a speedy recovery.
If we can assist you in relation to any claims please do not hesitate to contact us.
Condition 6 to the Industrial Special Risks (ISR) policy states that the Insured should provide “all particulars and details reasonably practicable of the loss and shall produce and furnish all books of accounts and other business books, invoices, vouchers and all other documents, proofs, information, explanations and other evidence and facilities as may reasonably be required for investigation and verification of the claim”.
This concept seems simple enough. If property has been destroyed, documentation supporting ownership and the amount of reinstatement must be supplied. Proof of ownership may be in the form of photographs, original purchase invoices, employee declarations, operating manuals, etc.
When a corporation has computerised records is an electronic copy of an invoice adequate or does an original invoice need to be obtained? If the integrity of the accounting system is appropriately audited each year a computerised copy may be considered adequate. Some insurers still require an original document be sourced.
When it comes to Consequential Loss what constitutes adequate proof of future earnings?
When all that is “reasonably practicable” has been supplied it may be inappropriate to produce documentation that is not readily available from the accounting system.
For more information or if we can be of assistance to your please call us.
Outback Australia was drier than expected when the rear trailer of a road train carrying 2,640 cartons of beer caught fire between Bourke and Cobar on 6 April 2004.
Some 79,000 stubbies were destroyed.
It would have been necessary to conduct a stock take of the remaining stubbies to quantify the claim for the stock loss.
It may have also been necessary to conduct a taste test to determine whether the remaining beer was heat affected.
We hope the stock take was conducted before the taste test!
A business has a water damage claim. Their accounting records include a perpetual stock system and weekly stock counts are performed for re ordering purposes. There was a total stock loss and these records are presented to loss adjusters. A list of water damaged equipment is also provided.
Subsequently the loss adjuster writes to the Insured advising that their role is not to prepare the claim and they could not consider any claims until these have been properly presented by the Insured.
What is adequate presentation? Will the time and effort of your staff to “present” information be covered under the policy?
If an Insured commits internal resources to obtaining and documenting the claim will these costs be covered?
A Mark IV Industrial Special Risks (ISR) policy wording for Claim Preparation Costs covers reasonable professional fees for preparation of claims under Sections 1 Material Damage and 2 Consequential Loss. The Mark V policy requires these costs be incurred with the consent of Insurers. Business pack policies have hybrid versions of these wordings.
The insured’s staff may have the required expertise to present the claim however it is unlikely that the claim preparation cover will respond. This is because Section 2 of the policy requires any savings in expenditure be recognised. If normal wages are claimed under the cover for claim preparation fees then a saving in normal wages expenditure would need to be recognised. Subject to any underinsurance penalties the result is nil impact on quantum.
Claim Solutions specialise in preparing claims. Our many years experience and dual qualifications in accounting and insurance enable us to:
- Quickly recognise key issues;
- Advise on loss minimisation;
- Identify insured costs;
- Recognise key documents required;
- Interpret policy wordings;
- Quantify the loss;
- Submit claims promptly and in the format required by loss adjusters and insurers; and
- Assist in claim resolution.
Perhaps most importantly, use of specialist staff will enable the Insured’s own staff to concentrate on what they do best – running a successful business.
PROPERTY IN CARE CUSTODY AND CONTROL
Our Summer newsletter suggested it was time to consider the current replacement values of building, equipment and contents.
Most Industrial Special Risks (ISR) and commercial policies provide reinstatement cover. This means that in the event of a loss the policyholder is entitled to the current equivalent replacement provided the Declared Values are adequate. The reinstatement values of property should be carefully considered
When reviewing the many water damage claims in Melbourne arising from the storms in December 2003 and January 2004, it was apparent that considerable property was not insured and had slipped through the cracks when determining Declared Values or separate sub limit requirements. This arose from the following situations:
- consignment stock, which was required to be insured when in the custody of customers was not;
- customer goods for which a business was required to insure were not;
- the property was excluded under the ISR policy and were not otherwise insured eg. registered motor vehicles.
- customer goods were only covered under liability policies not property policies. Simply put, the cover only provided for negligence of the holder of the goods and specifically excluded Acts of God.
This resulted in some rather embarrassed businesses and legal actions threatened by customers and suppliers.
It is important to be fully aware of the property for which the business is responsible. This may range from the simple eftpos or vending machines to higher value consignment stock, or customer goods.
Similarly, it is necessary to ensure that customers or service providers have adequately insured your property while it is in their custody? How effective are the conditions of such transactions on the reverse of purchase order or their invoice?
Don’t underestimate the cost of underinsurance.
On the Business Interruption side, the water damage arising from the recent storms once again highlighted the link through the customer and supplier chain. Businesses dependent on those impacted by water damage had considerable waiting times for stock to dry, be re manufactured, or equipment to be repaired and replaced. The losses associated with these time frames were not insignificant and may include a Loss of Gross Profit associated with a Reduction in Sales or Extra Costs.
The recent water damage claims highlighted that ISR policies should be reviewed to determine whether they are sufficiently broad to cover these losses.
Would your policy respond to these costs or do they represent good risk management?
For more information or if we can be of assistance to you or your clients please call us.
Claim Solutions provides a specialist insurance claims service. Our firm is recognised as one of the leading practices in this field with both national and international companies featuring amongst our clients. Our aim is to provide an efficient, professional and complete claims service which responds to your needs in times of crisis. We are available to assist in relation to any of the above incidents or similar losses.
The Articles which appear in this Newsletter are not intended to be a substitute for specific technical advice.