Underinsurance On Property

Most Industrial Special Risks (ISR) and commercial policies provide cover for reinstatement value. This means that in the event of a loss the Policyholder is entitled to the current equivalent replacement provided the Declared Values are adequate. The reinstatement values of property should be carefully considered.

When reviewing the many water damage claims in Melbourne, Victoria, Australia arising from the storms in December 2003 and January 2004, it was apparent that considerable property was not insured and had slipped through the cracks when determining Declared Values or separate sub limit requirements. This arose from the following situations: -

• Consignment stock, which needed to be insured when in the custody of customers was not.
• Customer goods a business was required to insure were not.
• Property excluded under the ISR policy was not otherwise insured eg. registered motor vehicles.
• Customer goods were only covered under liability policies not property policies. Simply put, the cover only provided for negligence of the holder of the goods and specifically excluded Acts of God.

This resulted in some rather embarrassed businesses and legal actions threatened by customers and suppliers.

It is important to be fully aware of the property for which a business is responsible. This may range from the simple EFTPOS or vending machines to higher value consignment stock, or customer goods.

Make sure the reinstatement value of all property for which the Policyholder is responsible is included in the Declared Value. Don’t underestimate the cost of underinsurance.

Author

Published with permission of Claim Solutions Pty Ltd.

Insurance Policy

Country: - Australia.

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

Insurer: - Various.

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