Welcome to the Spring 2004 edition of Claim Solutions’ Newsletter.
The events tracked over this last quarter include a surprising amount of fires in shopping complexes and unfortunate collisions where vehicles have left the road and smashed into shop fronts. Other events include LPG, natural gas and chlorine leaks, product recalls and separate hailstorms affecting both Adelaide and Sydney.
Some of the events which occurred in the last quarter are listed on page 4 of this Newsletter and highlight the need for adequate insurance cover.
If you or your clients have been affected by incidents such as these and would like to discuss the extent of any insurance cover which may respond please do not hesitate to contact us.
“I would like to forward my appreciation for your time and effort with our insurance claim for loss of income. A lot of effort was required and Claim Solutions expertise greatly assisted its resolution. I would certainly recommend your company in the future.”
As always, we hope that all those who have sustained losses have a speedy recovery.
In August 2004 a major fire in the Mitcham Shopping Centre in Adelaide resulted in damage reported to be in the vicinity of $20m.
In the same month fire damaged shops in the Macedon Square Shopping Centre in Templestowe, Victoria.
A fire also occurred in the Torrensville Plaza Shopping Centre in South Australia in September 2004.
Insurance claims involving shopping complexes present many unique issues. Some of these may include: -
Relocation – Many tenants may need to lease alternative temporary premises simultaneously. Vacancies in the neighbouring area are likely to be limited. While some tenants simply miss out those fortunate enough to secure space may be required to pay exorbitant rent.
Multiple Interests - A large number of parties become involved in the claim process including different insurers, loss adjusters and fire reinstatement contractors representing the landlord and the tenant. An organised approach to the claim process is required.
Reinstatement – The landlord may take the opportunity of improving the layout of the complex extending the period of interruption for retailers.
Advertising – A comprehensive advertising campaign co-ordinated by Centre Management is often required to encourage customer traffic to return to pre-fire levels.
Insurance policies for shopping complexes need to be drafted to recognise issues such as these and satisfy both the landlords’ and tenants’ requirements.
Life imitated an action movie in Darwin’s city centre cinemas on 7 August 2004 when film goers were evacuated after the lobby filled with smoke.
Thanks to the prompt and sensible action of management no-one was injured.
However the cinema may have experienced an adverse affect on popcorn sales as well as movie takings as the manager, Andrew Fry, reported that the smoke originated from a fire in a popcorn machine.
The historic Melbourne GPO reopened on 5 September 2004 following a fire on 10 September 2001 that damaged the interior of the building. While the fire was contained to the retail section of the building it has been a long process of reinstatement.
There have been a number of other fires in historic premises in the last quarter, most notably the Uniting Church in Ascot Vale which was gutted by fire on 28 August 2004.
A reinstatement policy covers the repair or replacement of property damaged or destroyed to a condition equal to but not better or more extensive than its condition when new.
The Melbourne GPO has occupied the corner of Bourke and Elizabeth Streets since 1867 and the Uniting Church was 107 years old. How do you replace a building in excess of 100 years old and restore its heritage?
Obviously, you can’t but modern products / replicas may provide a similar condition.
There are a number of less obvious issues that arise from reinstatement of heritage listed premises.
What regulations currently apply? Will the council allow you to construct, change, alter?
What time frames are involved in council approval for such property? It is worth noting that plans for reinstatement of the St Kilda pier which was destroyed by fire on 11 September 2003 were only just released in September 2004.
If the policy requires a sub limit for professional fees, is it adequate to cover the costs of architects’, surveyors’, consulting engineers’, and other fees for estimates, plans, specifications, quantities, tenders and supervision as a result of the Damage? This can be quite expensive in heritage listed buildings and often starts with re constructing original plans.
Does the policy provide cover for Extra Cost of Reinstatement and is it adequate? Historic buildings generally do not meet current regulations noting particularly disabled access/ facilities, fire walls and the like.
When was the last time artworks were valued and is the sub limit adequate?
If trading from the premises, most importantly - is the Indemnity Period adequate to cover the reinstatement of such property and the time to return to pre loss trading results?
Our Autumn 2003 newsletter discussed extra costs of reinstatement and the Winter 2003 newsletter highlighted some of the issues affecting Indemnity Periods. Archive copies of all our newsletters can be found on our website at www.claimsolutions.com.au
House of Wax
News reports indicate that at approximately 6.40 pm on Saturday 26 June 2004 flames engulfed Studio Eight at Movie World on the Gold Coast.
A candle being used on the film set of the remake of “House of Wax” was the suspected cause.
The costs incurred and losses sustained as a result of damage to film risks can be considerable. As with other commercial claims they involve both Material Damage and Business Interruption.
The Material Damage costs may encompass costs to rebuild film sets, props, costumes, accessories as well as camera & sound equipment, lighting and film.
Sets must be rebuilt to retain film continuity.
Camera equipment may well be hired and may be the subject of alternative insurance arrangements.
Business Interruption losses can be significant. Several weeks or even months may elapse before sets are restored. Contractual payments to actors are considerable and tight film budgets often prevent producers from retaining the actors. If possible film sequences need to be rescheduled.
It may be necessary for actors to move on to other roles possibly even overseas. Producers, camera men, gaffers and grips may also have other engagements.
Additional costs may be incurred to retain key players or fly them in from overseas locations.
The release date may also be delayed. Advertising material and press releases may have to be reprinted and interviews may have to be postponed.
In this instance flames and wax seemed to be a costly combination!
Happy to Retire Pty Ltd suffered storm damage. The storm lifted the roof and water damage was sustained to stocks and computer driven manufacturing equipment. After assessing all options, the equipment was cheaper to replace than repair. New equipment was competitively sourced in Germany with a lead-time of at least 12 weeks. The company had adequate Material Damage and Business Interruption cover with a 12 month maximum Indemnity Period.
The proprietors spent the first 10 weeks following the loss assisting clean up operations, dealing with council, negotiating with customers, sourcing temporary premises, locating potential hire equipment (to no avail), seeking competitive quotations for repair and replacement of equipment, providing information to loss adjusters etc..
At this time Mr & Mrs Happy decided they would not recommence trading operations. The Industrial Special Risks (ISR) Mark V policy states that if the Insured “forms the intention of ceasing to carry on the Business or any part of the Business, or if any part of the Business is disposed of, permanently discontinued or the Insured ceases to have any proprietary interest in the Business” the Business Interruption insurance cover will cease.
The Business Interruption policy ceased at the time of Happy’s decision. Their Business Interruption losses were paid for 10 weeks only and they retired, happily, to Queensland.
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.
The Articles which appear in this Newsletter are not intended to be a substitute for specific technical advice.