Customer/Supplier Extensions  About Claim Solutions


Welcome to the Claim Solutions’ Newsletter for Summer 2004.

Our previous newsletters have highlighted so called “one-off”, hundred year, or unimaginable events such as power outages across North America, Canada and Italy (Spring 2003), tornados (Winter 2003), SARS (Autumn 2003), earthquakes etc.

Unfortunately, it seems there is a never-ending source of such events making them more the norm than not.

In this newsletter we report on those closer to home – the storm damage that dampened Christmas for many and the Moomba gas crisis which is continuing.
A list of other Australian losses is on page 4.

As always, we hope all those who sustained a loss experience a speedy recovery and a prosperous 2004.

If we can assist you in relation to any claims please do not hesitate to contact us.

Melbourne Storms December 2003

UmbrellaWith stage 2 water restrictions throughout Winter and Spring, it must have seemed a bad dream when Melbournians awoke 3 days in to Summer to news of cars floating down Spencer Street and a flooded Eastern Freeway.

Storms heralded the worst in Melbourne in 100 years caused significant damage to domestic and commercial property and infrastructure.

The damage bill has been estimated at $100 million (The Age 8 January 2003) and the clean up continues with many individuals living with family, friends or in hotel accommodation throughout the Christmas and New Year period. Accordingly, most media concentrated on the domestic impact.

The effect on commercial business immediately prior to the retail Christmas boom was devastating. Leave was cancelled and with a lack of contractors, businesses utilised their own employees in clean up operations.

Can this time and effort be claimed under insurance policies? This will depend on the policy however, in some instances normal wages will not be recovered.

There is a bonus for some business pack policy holders with seasonal stock increases in limits applying immediately before Christmas.

Other serious issues of blocked drainage systems have also brought about possible subrogation actions.

For more information or if we can be of assistance to your clients please call us.

Odd Spot - Did you say toasted or roasted?

BurgerIt is becoming common to hear of terrorist threats closing airports or flights.

However, on 12 November 2003 the Cairns Airport domestic terminal was evacuated because of a burnt toasted sandwich.

In deciding whether this interruption would fall for consideration under a property policy we immediately noted there would be damage – the sandwich was clearly burned, however, would the faulty workmanship exclusion preclude a claim?

We trust the airport and customers were not inconvenienced for too long.


In light of the recent unforseen losses are you/your clients adequately insured if these losses happened to you?

Did you know you could update your Declared Values in the middle of the period of insurance? You do not have to wait until the renewal date.

If you buy a new piece of major machinery during the year you should always advise your broker immediately to ensure you are adequately covered in the event of a loss.

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.

If it has been some time since you considered the current replacement values of your building, equipment and contents, this should be a priority in 2004.

If the business has purchased new equipment, opened a new shop, or has a new line, these will impact trading results. The Declared Values for Gross Profit, Payroll and Additional Increase in Costs of Working should not be forgotten.

Acts of God

Wizard“Acts of God” is an oft used term which tends to be defined as natural threats (as opposed to accidental or intentional), which is not the fault of any individual. Examples generally include lightening, hail, windstorms, flood, earthquake, volcanic eruption, tidal wave, etc.

Acts of God can be insurable. In commercial policies, eg. Industrial Special Risks (ISR) or perils wordings, it is unlikely that you will find the term “Acts of God”. An ISR type policy covers all events unless they are specifically excluded (eg. flood, earthquake in North America etc.) and a perils wording includes only those specific events (specified risks) that are insured.

The term “Acts of God” is more commonly referred to in contractual exclusions. For example, it tends to be included in the terms and conditions of service contracts, and warranty conditions may exclude “Acts of God”. You will also tend to see “Acts of God” included in force majeure contractual wordings in defining those events that are beyond the control of the parties to the contract.

Moomba's New Year Crisis

In scenes reminiscent of the Victorian Gas Crisis which occurred on 25 September 1998 a fire broke out at the Moomba gas refinery in South Australia on New Year’s Day.

FactoryDiscussion of national energy strategies are back on the agenda and highlight the need for adequate disaster recovery plans that include public utilities and customer/supplier considerations. We explore customer /supplier issues more specifically below.

At the time of writing, the Santos plant was operating at 40% capacity with an expected 8 weeks before full capacity could be restored. This has had a significant impact on businesses in SA and NSW with the 50 largest users in SA ordered by the State Government to cease operations (

Force majeure contractual wordings are under the spotlight and legal actions are again being considered. Like the Longford crisis these may take years to resolve.

Customer/Supplier Extensions

The Santos outage has once again highlighted the impact of losses throughout the supply chain.

The immediate response may be to review your public utilities extension. This may be adequate but wordings may limit the cover to a government owned organisation or one that is adjacent to your property.

ScissorsIf you are a customer of, or supplier to Santos, you are likely to understand the current impact to your business. For some this means a total cessation of operations from normal supply channels. Other businesses are able to import part or fully manufactured products and continue trading, albeit at reduced levels.

Importing or outsourcing to competitors comes at a cost, often a very significant and long term cost. Is there any insurance recourse?

An Industrial Special Risks (ISR) policy may provide an extension of cover under the Business Interruption section to cover damage occurring at a customer or supplier’s premises.

Consider further the manufacturer of plastic boxes. It obtains its components from the Reliable Supply Company Pty Ltd. The Reliable Supply Company obtains gas from the Moomba plant to produce its products. The Reliable Supply Company can no longer manufacture and notifies its customers. It will take the manufacturer of boxes some time to source supply from elsewhere.
A further, broader, endorsement provides cover for customers of suppliers and/or customers.
Depending on the policy, these extensions of cover may not be standard and the suppliers and/or customers may need to be specified in the Schedule. A percentage or limit of cover also needs to be identified.

If a business is heavily dependent on other key business/s for supply or sales such cover is a necessity and part of a good risk management plan. It is very important that any limits specified are considered very carefully.

Knowing how long, costly and potentially unsuccessful legal action may be, it makes sense to have insurance cover when the impact of loss at a customer or supplier’s premises can have such a significant impact on your business.

If we can assist you or your clients with such claims please contact us.

About Claim Solutions…

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.