Time Deductible

A time deductible is an excess expressed in time not dollars.

It often appears on a Business Interruption risk and creates a range of practical problems when handling a claim.

The Schedule may contain the words "Time deductible – 30 days" but rarely contains a Basis of Settlement. Is the time deductible intended to exclude the Loss of Gross Profit associated with a Reduction in Turnover for the first 30 days from the date of loss? Is it also intended to exclude the additional costs incurred to minimise the Reduction in Turnover over the first 30 days? If so, the Policyholder may not receive any contribution from the Insurer for additional expenditure incurred immediately after the loss which minimises the Reduction in Turnover after the initial 30 days has expired.

In some instances a Basis of Settlement is provided but the wording is ambiguous and is insufficient to clearly attribute a value to the deductible. For example the following wording may be used. "….. the Company shall not be liable for the amount of Business Interruption loss sustained during the number of stated hours or days which immediately follow the physical loss or damage".

It is difficult to apply this wording to a claim of additional costs as the word "sustaind" is not defined.  Is the additional cost "sustained" when the service is provided, at the date of the invoice or whe it  is paid? This ambiguity may cause the various parties involved in the claim to extract considerable information in relation to all additional costs and perform several calculations to provide a basis for discussing the value of the time deductible. The difference between the highest and lowest deductible can be significant.

Dollar deductibles are much clearer.

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Author

Published with permission of Claim Solutions Pty Ltd.

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Insurance Policy

Country: - Australia.

Policy Description: - Mark IV Industrial Special Risks (ISR) and many Fire policies.

Insurer: - Various.

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