Welcome
Looking For The sun |
Welcome
to the Summer edition of Claim Solutions' Newsletter.
This quarterly publication is aimed to provide
you with a claims update including breaking news in relation
to insurance claims, interesting and sometimes unusual interpretations
of insurance policies and a summary of recent events which
may be the subject of insurance claims.
Fires, gas leaks, explosions, chlorine spills,
power blackouts and even an earthquake and mini tornado all
occurred over the last quarter.
A list of the events which may have been the
subject of insurance claims are listed on page 4.
These reinforce the need for adequate insurance.
We hope you find the content of this newsletter
useful and informative.
Your
feedback and enquiries in relation to our services are welcome.
to view a list of other Australian losses |
Fire
can strike twice
We prepare
insurance claims for clients ranging from small family
businesses
to large national and international corporations.
Fire often strikes the larger clients more
than once. Many have numerous situations of risk. Rarely does
it strike small family businesses twice.
In February 1998 fire destroyed a manufacturer
of perspex signs in Cheltenham, Victoria. A paper clip inadvertently
passed through a paper shredding machine, became hot, igniting
paper and spreading flames throughout the building.
Claims were progressively prepared and submitted allowing
the financial tragedy to be resolved.
In December 2001 we received a telephone call
from our old client.
They advised us their business had again been
razed.
A diffuser in a fluorescent tube above a desk
overheated overnight. Flames quickly spread to canite ceiling
tiles and then throughout the building destroying the plant,
machinery and contents replaced from the insurance proceeds
paid in 1998 and 1999.
Despite enormous personal and financial misfortune
our client has remained positive and is again rebuilding their
business.
Fire can strike twice!
Odd Spot
Bulldogs in 2002! |
Whilst
we are avid AFL fans of varying teams, we were surprised to
be appointed on the basis of our allegiances.
Our company profile details a selection of clients, large
and small across many industries.
These include the
Smorgon Group.
Our new client
advised us that if our services were good enough for the Chairman
of the Western Bulldogs they were good enough for his company.
Go Bulldogs in
2002!
For a
copy of our Company Profile please telephone Joe or Susan.
What
can go wrong will go wrong
What Next? |
In November
2001 we were asked to prepare a claim as a result of a fire
which destroyed a motel in June 2001. The following circumstances
prevailed.
The cause of the
fire was attributed to an electrical fault.
The business was amply insured for both Material Damage and
Business Interruption.
The motel was
the owner's only source of income.
The business was financed through a bank loan already at its
limit. The loan was not in default prior to the fire.
The Insured exhausted
savings and then borrowed money from friends to meet daily
living expenses pending payment of insurance proceeds.
In September 2001
the leasing company repossessed the Insured's car when payments
defaulted.
Liability was
admitted in October 2001 and a progress payment of $250,000
was received, some 4 months after the fire. This magically
appeared in the Insured's bank account without the completion
of any formal documentation e.g. Letter of Notification or
Form of Release.
The Insured utilised
part of these funds to purchase a second hand car and repay
loans to friends.
Within days friends
advised the Insured that repayment cheques had bounced. On
contacting the bank he was informed that his account had been
frozen. The bank were concerned insurance proceeds were being
utilised for purposes other than bank loan repayments and
rebuilding. They are now progressively releasing funds.
The building is
unlikely to be reinstated by June 2002. Any Loss of Gross
Profit after this date is not Insured.
Perhaps these
problems would not have arisen if:-
Underinsurance
Should the Underinsurance
Clause be Deleted? |
Once a
loss occurs it is important to obtain a thorough understanding
of the insurance cover and how it responds.
This includes
the underinsurance clause.
Most underinsurance
clauses indicate that it is necessary to test whether the
amount insured is adequate. If so, the insurance cover responds
in full. If not, a penalty is imposed.
In many Business
Interruption Policies the penalty reduces the Insurer's liability
to the proportion of the risk which has been insured.
For example, if
the declared value represents 80% of the risk which should
have been insured, the insurance policy responds to 80% of
the loss.
Many policies covering
property often provide a margin before the underinsurance
penalty applies.
The underinsurance
clause exists to ensure that the Insurer receives sufficient
premium from clients to meet claims. In other words it ensures
that the insurer does not pay claims in excess of the premium
collected and risk covered.
Some clients obtain
independent valuations at renewal to ensure the amount insured
for property is correct. Similarly independent advice on the
amount of cover required for Business Interruption may be
obtained.
In these
instances the Insurer may be satisfied that sufficient premium
has been collected and it may be appropriate to delete the
underinsurance clause.
Payroll Take 2
Our Spring 2001 newsletter provided an explanation
of the two main forms of insuring payroll: -
It explained that to effect Dual Basis Payroll
an Initial Period, Remainder Percentage and Period of Consolidation
need to be specified.
The Initial
Period represents the period immediately following the fire
over
I need my pay! |
which
all employees will be required. For example they may be required
to clean up, or union awards or enterprise bargaining agreements
may require payment of a minimum number weeks wages on termination.
The Remainder Percentage represents the proportion
of the payroll after the Initial Period which may continue
to be paid. For example it represents the salaries and/or
wages for key management and administration staff and/or key
manufacturing and supervising labour. This proportion is expressed
as a percentage.
The Period of Consolidation is the number
of weeks wages which have been covered if the Initial Period
and the consolidated Remainder Period is combined. For example
if a Maximum Indemnity Period of 52 weeks has been selected
with an Initial Period of 12 weeks and Remainder Percentage
is 40%, the Period of Consolidation is 28 weeks: -
(12 weeksx100%)+((52 weeks-12 weeks)x40%).
Specialist
advice should be obtained to ensure payroll is adequately
covered.
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About
Claim Solutions
Claim Solutions was established to provide
a specialist insurance claims service.
Our firm is recognised as one of the leading
practices in this field with both national and international
companies featuring amongst our clients.
Our aim
is to provide an efficient, professional and complete claims
service which responds to your needs in times of crisis.
If any
of your clients sustained the above or other losses we are
available to assist them.
For
a copy of our Company Profile please
contact Joe or Susan.
