Consequential Loss And Top 15 "Often Missed" Tips

Following are 15 often missed tips to consider in relation to insurance cover for Consequential Loss under a Mark IV Industrial Special Risks (ISR) policy: -

The Basis of Settlement

1. The Material Damage proviso means that for a claim to be made under Section 2 (Consequential Loss) there must be damage to unexcluded property.
2. Increase in Cost of Working (item 1(b)) does not require a sub limit as it is insured within the Declared Value for Gross Profit.
3. The economic limit test applies to claims for additional costs under item 1(b). For example, a claim for $5,000 will not be paid if the expenditure only saves Gross Profit of $2,500. The claim will be limited to $2,500.
4. Item 4 Additional Increased Cost of Working requires a sub limit and is not subject to the economic limit test.
5. In the event of underinsurance on Gross Profit, the uninsured portion of additional costs claimed under item 1(b) may be claimed under the cover available for Additional Increased Cost of Working (item 4).
6. If a business intends to insure 100% of its payroll it is included within item 1(a) Loss of Gross Profit.
7. If separately insuring payroll on a Dual Basis (item 3), payroll limits must be specified in the Schedule and payroll listed as an Uninsured Working Expense.
8. Item 2, Claim Preparation Fees, includes reasonable professional fees to prepare both Material Damage & Consequential Loss claims.
9. The adjustments clause allows the calculations of Rate of Gross Profit, Annual Turnover, Standard Turnover and Rate of Pay-roll to reflect the trend, variations or other circumstances affecting the Business.

Memoranda to Section 2

10. The Departmental Clause allows a claim to be calculated by departments if the business is conducted and reported financially in departments [case study].
11. Allowance should be made if a loss is temporarily postponed by maintaining turnover from accumulated finished goods stock as specified in the Accumulated Stocks Clause. [Case Study].
12. The Public Utilities Extension extends cover to insured peril damage occurring at a Public Utility. This is noted as any electricity station or sub-station, gas works or water works. However, the standard wording states it must be situated on or immediately adjacent to the Premises.
13. In the event of a Salvage Sale the Loss of Gross Profit is calculated as defined and excludes turnover from the sale. The Gross Profit earned at the salvage sale is then deducted.

Memoranda to All Sections

14. The Memoranda to All Sections allows an Adjustment of Premium where calculations at the end of the insurance period alter the Gross Profit in that period.

Conditions

15. Finally, under the Termination of Cover clause it is a Condition of the Policy that if the Business ceases, is disposed of, is in liquidation or the Policyholder becomes a bankrupt, the Consequential Loss insurance and any claim ceases.

---

Author

Published with permission of Claim Solutions Pty Ltd.

Insurance Policy

Country: - Australia

Policy Description: - Mark IV Industrial Special Risks (ISR) policy

Insurer: - Various

External Links