Stock has been damaged by an insured peril, isolated, counted, costed in accordance with the Basis of Settlement and paid by Insurers. What happens next?
If the stock is not completely destroyed, loss adjusters will ask the Insured if the damaged stock has any value to them ie. for the purposes of a salvage sale. If it does not, then consideration of salvage merchants may be made by loss adjusters. Such salvage sales have potentially wide distribution with internet sale bases.
An Insured needs to consider any potential damage caused by such sales. For instance:
- returns to Insured of damaged goods;
- diluting sales if sold in the same sales area;
- liability issues depending on the type of damage;
- warranty claims; and
- infringement of Trade Marks and intellectual property.
Memoranda to Section 1 of the Industrial Special Risks Mark IV policy contains a Branded Goods clause. This states:
“Any salvage of branded goods and/or merchandise, the Insured's own or held by the Insured in trust or on commission, and/or goods sold but not delivered, shall not be disposed of by sale without the consent of the Insured. If such salvage is not disposed of by sale then the damage will be assessed at the value agreed between the Insured and the Insurer(s) after brands, labels or names have been removed by or on behalf of the Insured. “
This clause applies to the salvage of branded goods which are:
a) “..... the insured’s own or
b) held by the Insured in trust or
c) on commission” and/or
d) Goods sold but not delivered.
Firstly, the clause requires the approval of the Insured for disposal by sale. It is usually at this point that an Insured may agree to such a sale provided certain conditions are met such as all branding, barcodes or identifying features being removed prior to sale. It is important this be clearly conveyed to the loss adjuster and salvage merchant. It is also appropriate for the Insured to request details of sale(s) so they may inspect the merchandise to ensure their requirements are met.
If the Insured does not provide consent for the sale, the clause advises the “value” of the goods be determined “after brands, labels or names have been removed”. Historically this allows a salvage value to be identified which is then deducted from the value of the stock determined in accordance with the Basis of Settlement.
Similarly, the intention of this clause was to value the salvage and should not be read in isolation to the policy as a whole.
Author
Published with permission of Claim Solutions Pty Ltd.
Insurance Policy
Country: - Australia.
Policy Description: - Industrial Special Risks and many Composite or Businesspack type policies.
Insurer: - Various.
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