One of the major reasons for appointing claims preparers at the outset of a loss is to assist in restoring cash flow. Early quantification and settlement of claims for stock damage is integral to this goal.
Where stock is damaged but identifiable, quantities and descriptions should be recorded immediately after the loss.
Where stock is unidentifiable it is paramount that quantities and descriptions of undamaged items be recorded immediately after the loss to allow the destroyed stock balance to be reconstructed.
The Mark IV Industrial Special Risks Policy (ISR) Basis of Settlement provides:
“(b) On raw materials, supplies and other merchandise not manufactured by the Insured: the replacement cost at the time and the place of replacement or, if such property is not replaced, the value thereof at the time and place of the damage.
(c) On material in process of manufacture: the replacement value of the raw materials and the value of labour and other overhead charges expended thereon at the time and the place of the damage.
(d) On finished goods: the replacement value of the raw materials and the value of labour and other overhead charges expended thereon before any allowance for profit or the cost of re-stocking such goods, whichever is the lesser”. [Bold added.]
A list of damaged stock should be prepared, valued in accordance with the policy and a claim submitted for the purpose of a progress payment.
Stock, whether it is raw materials, work in process or finished goods, is not subject to the “Reinstatement or Replacement Memoranda”. This means damaged stock does not require repair or replacement for the claim to be settled.
It is paramount to include the loss adjuster/s in the process of identifying, counting and verifying damaged stock. This provides them with the opportunity of performing test counts and sampling that can be verified against the formal claim submission, which may be supplied some time later when appropriately valued.
If review and testing of stock is delayed, the stock may be in external storage or destroyed by council, health order or other regulatory requirement. This makes verification unnecessarily protracted and may impact on the provision of a timely progress payment.
One of the goals of our newsletters is to highlight the importance of communication by all parties to a claim. Payment for the replacement cost of stock as soon as it has been quantified should be the objective of all.
Don’t count your chickens but count your stock and... when you do... tell the loss adjuster about it!
Author
Claim Solutions Pty Ltd
Insurance Policy
Country: - Australia
Policy Description: - Industrial Special Risks Policy
Insurer: - Various
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