The following article considers the Maximum Indemntity Period by case study.
5 Jan 04 – The insurance policy is renewed and an indemnity period of 6 months specified. Cover for Claim Preparation Costs is restricted to the Loss of Profit claim not the Material Damage claim.
20 Feb 04 – A fire destroyed part of the building, stock and contents. A large proportion of the sales area became unusable. The indemnity period commences.
21 Feb 04 – Insurers are notified and loss adjusters appointed. Claim preparers are engaged but due to the restricted cover the role is limited to preparation of the Business Interruption claim.
26 Feb 04 – Debris is removed. The damaged section of the building is isolated, the remaining sales area reorganised to maximise customer traffic. Signwriting is completed advising customers that trading is continuing. In reality sales cannot return to normal at least until the building is reinstated.
27 Feb 04 – Loss adjusters introduce a builder to the Policyholder.
5 Mar 04 – Loss adjusters advise that the building assessment has been completed. A specification was not agreed with the Policyholder prior to the assessment and the scope of works is found to be inadequate.
Mar 04 – it becomes evident that the foundations beneath the shop are unstable due to the amount of water used to extinguish the blaze.
Mar to Apr 04 –Discussions continue in relation to the extent of damage and work required to reinstate the building.
2 Apr 04 – damaged stock is removed for insurers to recover any salvage value.
May 04 – An alternative builder is sourced due to the lack of response from the initial builder.
20 Aug 04 – the maximum indemnity period of 6 months expires. Any loss of Profit beyond this date is NOT covered by the insurance policy.
17 Sep 04 – plans for building reinstatement completed. Building works expected to be completed by February 05 if works commence immediately. Christmas 04 trade is severely impaired.
MORAL TO THE STORY
A six month indemnity period is often insufficient for sales to return to normal.
Building specifications should be agreed before quotations are obtained.
Cover for Claim Preparation Costs should be taken in relation to both the Property and Business Interruption loss to enable both elements of the claim to be monitored.
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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