Termination Of Business Interruption Cover

The following Case Study considers the Termination Clause which is contained in many insurance policies for Business Interruption.

Happy to Retire Pty Ltd suffered storm damage. The storm lifted the roof and water damage was sustained to stocks and computer driven manufacturing equipment. After assessing all options, it was discovered that it was cheaper to replace than repair it. New equipment was competitively sourced in Germany with a lead-time of at least 12 weeks. The company had adequate Material Damage and Business Interruption cover with a 12 month maximum Indemnity Period.

The proprietors spent the first 10 weeks, after the water ingress, assisting clean up operations, dealing with council, negotiating with customers, sourcing temporary premises, locating potential hire equipment (to no avail), seeking competitive quotations for repair and replacement of equipment, providing information to loss adjusters etc.

During the 11th week Mr & Mrs Happy were overwhelmed and decided they would cease trading.

The Industrial Special Risks (ISR) Mark V policy states that if the Policyholder "forms the intention of ceasing to carry on the Business or any part of the Business, or if any part of the Business is disposed of, permanently discontinued or the Insured ceases to have any proprietary interest in the Business" the Business Interruption insurance cover will cease.

The Business Interruption policy ceased at the time of Happy’s decision. Their Business Interruption losses were paid for 10 weeks only and they retired, happily, to Queensland, Austrlalia.

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Author

Published with permission of Claim Solutions Pty Ltd.

Insurance Policy

Country: - Australia

Policy Description: - Mark V Industrial Special Risks Policy

Insurer: - Various

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