Welcome to the 26th Edition of the Claim Solutions' Newsletter.

While our last newsletter highlighted recent international disasters our own shores have been affected by the tumultous weather patterns lately. We were also affected by Equine Influenza which continues to cost the industry millions of dollars.  

Claim Solutions has been bringing you the insurance impact of local
& international events for 9 years. Often we would like to provide a more detailed discussion of these events and receive your feedback.

To this end we have launched a new website www.insuropedia.com

It is a free, international, insurance knowledge bank. All of the articles in this newsletter are discussed in more detail at the new website. We look forward to your feedback.

Of concern in our list of events on page 4 is the number of vandalism and arson cases. In Victoria, MFB statistics indicate almost one quarter of local structure fires in the past year were deemed suspicious.

To see a list of recent losses,

Equine Influenza Insurance Impact

The first ever cases of equine influenza (EI) in Australia brought the
horse industry to a stand still. On 27 August 2007, the Department
of Primary Industries confirmed 47 cases of equine flu.  This rapidly grew and there have now been 628 infected properties in Qld and 3,455 in NSW.

All states and territories of Australia agreed to implement a standstill on the movement of horses. Penalties were hefty.

A number of race meetings, agricultural shows, breed shows and sales were cancelled throughout NSW & Qld.

Continuing reports suggest the Melbourne Cup may be cancelled or
delayed as a result. A public enquiry into the outbreak and
commonwealth quarantine procedures is underway.

Financial Impact

Reportedly the industry is worth AUD$8billion a year and is Australia's third largest employer.

Tabcorp has advised $171million in lost turnover and Racing Victoria Limited will post losses of $25million over the Spring Racing Carnival
due to lost TAB revenue due to EI.

The impact to the Australian share market was significant as well with
shares in Tabcorp Holdings Ltd, Tattersall's Ltd and Centrebet
International Ltd falling initially.

Potential Insurance Response


Generally livestock is insured for its replacement value (which should not exceed its reasonable market value). While there might not be any direct loss such as the death of an insured animal, it is generally required that your broker/insurer be notified if an animal is ill.

Cover for infectious diseases may not be available. A basic cover may only provide cover for Death, Accident, Theft or Straying. Additional cover may be required for veterinary fees.


Breeders should have insurance for Business Interruption, Loss of Gross Profit. In this case livestock should be insured on the basis of the estimated sales values of, for example, yearlings and stallions and
breeding programmes.As with livestock, generally, policies should
provide cover for:

  • Death due to an accident.
  • Death due to an illness or disease.
  • Loss of use due to an accident.
  • Loss of use due to an illness.

Betting Agencies

These are likely to have Property type standard and custom written
policies. However, whether these policies are specifically tailored to the business and this type of loss remains to be seen.

A standard Industrial Special Risks (ISR) policy wording specifically excludes losses from livestock (Property Exclusion 6).


News reports indicate jockeys have income protection insurance.
However, in most instances these polices have waiting periods ie. a nominated period of time you are out of work before the policy
responds, like an excess, such as 30 days, 60 days, etc.

And what of the many others impacted by EI?

Check your insurance polices. If you don't have cover this time consider tailoring your future policies to your business because EI looks like it will be around for some time.

To Rescue or Not to Rescue The Lady Cutler

That was the question on Wednesday 22 August 2007 when the historic and former Sydney ferry, the Lady Cutler, was returning from refurbishment in Portland in western Victoria and broke down. It was reported that the Lady Cutler left Portland on Sunday evening 19 August 2007 for a 22 hour trip. It experienced engine problems, was reportedly forced 100km south due to bad weather and anchored off Barwon Heads.

ABC local morning radio ran regular updates of the fate of the vessel and its 6 crew. Apparently a tug boat from Geelong arrived on Wednesday morning to tow it to safety and was turned around after the vessel's Insurer would not confirm it would meet the costs of moving it.

The owner advised the cost of hauling the vessel to Melbourne was around $25,000.

By Wednesday afternoon the Insurer agreed to meet the haulage costs after the owner had advised the crew would have to abandon the vessel, insured for $1.6 million. The owner believed contaminated fuel may have caused the engine failure.

Media reports condemned the insurance company's behaviour suggesting pencil pushers in offices miles away were making slow, incomprehensible ("refusing to help") and incorrect decisions. So many questions are raised and unanswered?

What is the damage to the vessel?

Is it covered under any insurance policies taken out by the vessel's owner?

Has the insurance company been held to ransom by the vessel owner and media?

And who was so concerned for the safety of the crew after 48 hours to leave them adrift a further day?

Most policies require costs to be incurred in the first instance. So why
didn't the vessel's owner arrange towing, forward the invoice to the
Insurer and argue policy application when the crew were safely on
terra firma?

New York Explosion - Case Study

On Wednesday 18 July 2007 a steam pipe exploded shooting steam,
water and debris into the air near New York's Grand Central Terminal in the Midtown section of Manhattan. It left a gaping hole in the street and traffic was halted.

The Mayor, Michael R. Bloomberg, in a televised briefing from the site said "A steam pipe, 24 inches in diameter, installed in 1924, burst."

According to a survey of 71 businesses around the site they have
reportedly lost nearly US$1.3 million. Not surprisingly most of the losses resulted from the period of closure. Around half of the businesses were closed for more than a day and the survey reported that the average loss per business was US$18,000.

In other reports business losses are estimated at millions and lawsuits are seeking millions more.

Australian Insurance policy response

Is there damage in the first instance?

If this event occurred in Australia, a claim for Loss of Gross Profit under a standard Industrial Special Risks (ISR) policy would require there to be damage to insured property (the Material Damage proviso).

If there is damage, say to shop windows smashed and stock destroyed, Section 2, Loss of Gross Profit would follow. The questions which must then be asked are:

  • What period of time has the business been affected by the damage
    i.e. the damage to the window? This is the Indemnity Period.
  • What is the financial impact to the business?

If there is no damage to insured property then what extensions of cover does the policy contain?

Prevention of Access

The standard ISR Mark IV wording has an extension of cover for
Prevention of Access. The damage, however, must be caused by an
insured peril under the policy and prevent access to the premises.

A common property exclusion under the ISR wording is for damage
by boiler or pressure vessel.

Public Utilities

If, as a result of the aforementioned explosion, there was a loss of water or power to the business would this be covered by the extension of cover for damage to Public Utilities?

Two issues arise. Firstly, it must be caused by an insured peril, as with
the Prevention of Access extension. Secondly the standard Australian
policy wording requires the electricity station, sub-station, gas works or water works to be situated "on or immediately adjacent to the Premises".

American Insurance Policy Response

US policies define the indemnity period differently. They also differ in their standard exclusions, extensions and available endorsements. As a result it is important to read each individual policy carefully.

Odd Spot - The Long Burn

We have come across some weird, wonderful and some times downright strange insurance news and usually the truth is much stranger than fiction.  

Take, for example, the news report on 12 September 2007 that advised the fire at the Gregadoo tip in southern New South Wales is expected to be extinguished shortly after burning for more than 2 years. The Wagga Wagga Council advised that 10 people had been working on this fire, caused by the illegal dumping of burning waste, for the past 6 months. Estimated extinguishment costs to date are around $1.35million.

Time to go and check those insurance policy Indemnity Periods.

The Articles which appear in this Newsletter are not intended to be a substitute for specific technical advice.

Let us find the Solution to your Claim, please contact us on +61 3 9642 8578 or email: info@claimsolutions.com.au