Branded Goods Clause - Property (Material Damage)
Consider the following case study.
A fire in the central distribution warehouse of a jean manufacturer, Dynamite Denim, was destroyed by fire. Some 2,000 pairs of jeans were destroyed. The remainder, some 4,000 pairs, were badly smoke affected and could not be sold through Dynamite’s retail outlets.
The smoke damaged jeans had a unit cost of $30 and a total cost of around $120,000. It was agreed these jeans had a salvage value and a fire sale expert offered $10 per pair i.e. a total of $40,000. An insurance settlement of $80,000 was suggested.
Dynamite was concerned the damaged product would ultimately be released to the general public. Not only would this cause an avalanche of complaints but it would also adversely affect the brand name and depreciate Dynamite’s image.
Most Industrial Special Risks policies contain a Branded Goods Clause. This enabled Dynamite to prevent the smoke affected jeans from being sold and entitled them to negotiate a salvage value after all brands, labels or names were removed.
After removing the zipper which was embossed with the Dynamite logo, the leather tag containing the brand name and several logo bearing cotton tags not much remained of the jeans.
A negotiated salvage value of $1 per pair or $4,000 was agreed and the claim was settled for $116,000.
Author
Published with permission of Claim Solutions Pty Ltd.
Insurance Policy
Country: - Australia.
Policy Description: - Mark IV Industrial Special Risks (ISR) policy.
Insurer: - Various.
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