Welcome
Droughts and Flooding
Rains! |
Welcome
to the Autumn edition of Claim Solutions’ Newsletter.
This past
quarter saw yet more storm damage in Melbourne and Queensland
which created an enormous volume of claim activity for us
all.
A mini
cyclone even hit a well known theme park on the Gold Coast
interrupting rides and leaving patrons on the chair lift unexpectedly
trapped!
Other
losses tracked since 1 January 2004 include fires, embezzlement,
explosions and machinery breakdown. A list of these appears
on page 4 of this Newsletter highlighting the need for adequate
insurance cover.
We hope
that all those who have sustained losses have a speedy recovery.
If we
can assist you in relation to any claims please do not hesitate
to contact us.
to view a list of other Australian losses |
How
Much Documentation is Enough?
Condition
6 to the Industrial Special Risks (ISR) policy states that
the Insured should provide “all particulars and details
reasonably practicable of the loss and shall produce and furnish
all books of accounts and other business books, invoices,
vouchers and all other documents, proofs, information, explanations
and other evidence and facilities as may reasonably be required
for investigation and verification of the claim”.
This concept
seems simple enough. If property has been destroyed, documentation
supporting ownership and the amount of reinstatement must
be supplied. Proof of ownership may be in the form of photographs,
original purchase invoices, employee declarations, operating
manuals, etc.
When a
corporation has computerised records is an electronic copy
of an invoice adequate or does an original invoice need to
be obtained? If the integrity of the accounting system is
appropriately audited each year a computerised copy may be
considered adequate. Some insurers still require an original
document be sourced.
When it
comes to Consequential Loss what constitutes adequate proof
of future earnings?
When all
that is “reasonably practicable” has been supplied it may
be inappropriate to produce documentation that is not readily
available from the accounting system.
For
more information or if we can be of assistance to your please
call us.
Odd
Spot
Drink Up! |
Outback
Australia was drier than expected when the rear trailer of
a road train carrying 2,640 cartons of beer caught fire between
Bourke and Cobar on 6 April 2004.
Some
79,000 stubbies were destroyed. It would have been necessary
to conduct a stock take of the remaining stubbies to quantify
the claim for the stock loss.
It
may have also been necessary to conduct a taste test to determine
whether the remaining beer was heat affected.
We
hope the stock take was conducted before the taste test!
Claim
Preparation
A business
has a water damage claim. Their accounting records include
a perpetual stock system and weekly stock counts are performed
for re ordering purposes. There was a total stock loss and
these records are presented to loss adjusters. A list of water
damaged equipment is also provided.
Subsequently the loss adjuster writes to the Insured advising
that their role is not to prepare the claim and they could
not consider any claims until these have been properly presented
by the Insured.
Own Staff Represent
Normal Costs |
What is
adequate presentation? Will the time and effort of your staff
to “present” information be covered under the policy?
If an
Insured commits internal resources to obtaining and documenting
the claim will these costs be covered?
A Mark
IV Industrial Special Risks (ISR) policy wording for Claim
Preparation Costs covers reasonable professional fees for
preparation of claims under Sections 1 Material Damage and
2 Consequential Loss. The Mark V policy requires these costs
be incurred with the consent of Insurers. Business pack policies
have hybrid versions of these wordings.
The insured’s
staff may have the required expertise to present the claim
however it is unlikely that the claim preparation cover will
respond. This is because Section 2 of the policy requires
any savings in expenditure be recognised. If normal wages
are claimed under the cover for claim preparation fees then
a saving in normal wages expenditure would need to be recognised.
Subject to any underinsurance penalties the result is nil
impact on quantum.
Claim
Solutions specialise in preparing claims. Our many years experience
and dual qualifications in accounting and insurance enable
us to:
- Quickly
recognise key issues;
- Advise
on loss minimisation;
- Identify
insured costs;
- Recognise
key documents required;
- Interpret
policy wordings;
- Quantify
the loss;
- Submit
claims promptly and in the format required by loss adjusters
and insurers; and
- Assist
in claim resolution.
Perhaps
most importantly, use of specialist staff will enable the
Insured’s own staff to concentrate on what they do best –
running a successful business.
Underinsurance
– Property Policies
Property in Care, Custody & Control
Our Summer newsletter
suggested it was time to consider the current replacement
values of building, equipment and contents.
Most Industrial
Special Risks (ISR) and commercial policies provide reinstatement
cover. 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 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:
a) consignment
stock, which was required to be insured when in the custody
of customers was not;
b) customer goods
for which a business was required to insure were not;
c) the property
was excluded under the ISR policy and were not otherwise insured
eg. registered motor vehicles.
d) 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.
Whos responsibility? |
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 the
business is responsible. This may range from the simple eftpos
or vending machines to higher value consignment stock, or
customer goods.
Similarly, it
is necessary to ensure that customers or service providers
have adequately insured your property while it is in their
custody? How effective are the conditions of such transactions
on the reverse of purchase order or their invoice?
Don’t underestimate
the cost of underinsurance.
