property insurance

PROPERTY & PECUNIARY INSURANCE

WEEK 16PROPERTY INSURANCE 1

THE SUM INSURED IT IS ESSENTIAL THAT SUM FOR WHICH THE

SUBJECT-MATTER IS INSURED REPRESENTS ITS FULL VALUE AT THE TIME OF EFFECTING THE INSURANCE & IS MAINTAINED AT THE FULL VLAUE THROUGHOUT THE PERIOD OF INSURANCE COVER.

IF UNDER INSURANCE i.e. SUM INSURED IS LESSER THAN VALUE OF SUBJECT MATTER THEN AMOUNT OF PREMIUM IS LESSER TOWARDS INSURER’S FUND.

THE SUM INSURED WHEN A LOSS OCCURS UNDER PROPERTY INSURANCE

POLICIES, THE SUM OR SUMS INSURED ARE REDUCED BY THE AMOUNT PAID IN SETTLEMENT, FROM THE TIME OF THE LOSS UNTIL THE NEXT RENEWAL DATE.

IF THE AMOUNT INSURED IS TO BE RESTORED TO THE NORMAL FIGURE, THE POLICY MUST BE ENDORSED & AN APPROPRIATE ADDITIONAL REMIUM PAID, SUCH ADDITIONAL PREMIUM BEING CHARGED PRO RATA FROM THE DATE OF REINSTATEMENT OF THE SUM INSURED TO THE NEXT RENEWAL DATE.

AN EXCEPTION TO THIS RULE IS THE DECLARATION POLICY: IN THIS POLICY WORDING PROVIDES THAT, FOLLOWING A LOSS, THE SUM INSURED IS AUTOMATICALLY RESTORED, THE INSURED UNDERTAKING TO PAY THE NECESSARY ADDITIONAL PREMIUM.

THE CALCULATION OF VALUE THE VALUE OF SUBJECT-MATTER OF THE

INSURANCE IS ITS VALUE:1. AT THE TIME OF LOSS;2. AT THE PLACE OF LOSS;

& VALUE MEANS ITS REAL OR INTRINSIC (GENUINE) VALUE, NO ADDITION BEING MADE FOR ANY SENTIMENTAL VALUE. NO ALLOWANCE MAY BE MADE FOR LOSS OF PROSPECTIVE PROFIT OR OTHER CONSEQUENTIAL LOSS. COST OF REINSTATEMENT IS THE USUAL

BASIS OF SETTLEMENT FOR BUILDINGS; FOR OTHER PROPERTY THE MARKET VALUE IS THE CUSTOMARY GUIDE.

BUILDINGS NORMAL BASIS FOR BUILDINGS IS THE COST OF

REPAIR OR REINSTATEMENT. ADJUSTMENT NECESSARY TO COMPENSATE FOR

‘BETTERMENT’. THIS BETTERMENT CAN ARISE:1. ADDITIONS OR IMPROVEMENTS MAY BE MADE

DURING THE REBUILDING; &2. THE ORIGINAL STRUCTURE MAY HAVE

DETERIORATED, SO THAT REBUILDING WILL GIVE NEW FOR OLD.

ALLOWANCES FOR ADDITIONS & IMPROVEMENTS ARE DEDUCTED, & WHERE REBUILDING GIVES NEW FOR OLD THE INSURED MAY HAVE TO CONTRIBUTE TO THE COST.

IF INSURED ASK FOR OVERTIME TO CONSTRUCTOR TO SAVE HIS CONSEQUENTIAL LOSS IT WILL BE MET UNDER CONSEQUENTIAL LOSS POLICY.

BUILDINGS WHEN A MANSION OR OLD-FASHIONED

PRIVATE HOUSE IS AFFECTED THE COST OF RESTORING IT TO ITS PRE-FIRE CONDIITON MAY BE UNECONOMIC.

THEN REASONABLE INDEMNITY WOULD BE THE MARKET VALUE OF A HOUSE.

OBSOLETE BUILDINGS OTHER THAN FARM OR HISTORIC OR IRREPLACEABLE

BUILDINGS, THE INDUSTRIAL & COMMERCIAL BUILDINGS WHICH ARE DEEMED ‘OBSOLETE’ – MEANS GENERALLY BUILDINGS AT LEAST FIFTY YEARS OLD, THE DESIGN & CONSTRUCTION OF WHICH IS SUCH THAT IT WOULD BE IMPRACTICABLE FOR THE INSURED TO REBUILD IN THE ORIGINAL MANNER. THE BASIS ARE:

1. THE COST OF PURCHASING A SIMILAR BUILDING TO THE INSURED BUILDING PLUS, IF INSURED, AN ALLOWANCE FOR REMOVAL OF DEBRIS COSTS; OR

2. THE COST OF ERECTING MODERN BUILDING PROVIDING COMPARABLE FACILITIES TO THE INSURED BUILDING PLUS, IF INSURED, AN ALLOWANCE FOR PROFESSIONAL FEES, REMOVAL OF DEBRIS COSTS & THE ADDITIONAL EXPENDITURE WHICH MIGHT ARISE OUT OF LOCAL AUTHORITIES’ REQUIREMENT.

OBSOLETE BUILDINGS FOR THIS BASIS TO APPLY IT IS NECESSARY FOR THE

INSURED TO GIVE A WRITTEN UNDERTAKING STATING THAT, IN THE EVENT OF A ‘SUBSTANTIAL’ LOSS, HE WILL REPLACE THE DESTROYED OR DAMAGED BUILDING BY ONE CONSTRUCTED IN MODERN STYLE & MATERIAL, OR BY PURCHASE OF ANOTHER BUILDING, IN EIHTER CASE PROVIDING COMPARABLE FACILITIES AT A LOWER COST THAN REBUILDING IN THE ORIGNINAL FORM.

THE INSURERS THEN CONFIRM THE AGREEMENT BY SENDING A LETTER OF INTENT (INTENTION) TO THE INSURED, & THIS MAY BE MODIFIED TO ALLOW FOR REINSTATEMENT FOR PARTIAL LOSS WHICH FALL SHORT OF THE CONTEMPLATED (TO SEE SERIOUSLY) ‘SUBSTANTIAL’ LOSS WITHIN THE TERMS OF THE REINSTATEMENT MEMORANDOM.

MACHINERY WHERE REPAIR OF MACHINERY IS POSSIBLE, THE

BASIS OF INDEMNITY IS THE COST OF RESTORING IT TO ITS PREVIOUS CONDITION.

IF THE MACHINERY IS DAMAGED BEYOND ECONOMIC REPAIR, THE FAIREST RECOMPENSE IS THE COST OF REPLACING IT BY SECOND-HAND MACHINERY OF THE SAME AGE, TYPE, CAPACITY, & CONDITION. ITS NOT PRACTICABLE SO BOUGHT NEW MACHINERY BUT HAVE TO MADE DEDUCTION BECAUSE:1. THE ORIGINAL MACHINERY IS NOT NOW

MANUFACTURED & REPLACEMENT WILL HAVE TO BE BY BETTER MACHINERY; OR

2. REPLACEMENT CAN BE BY THE SAME TYPE OF MACHINERY BUT MUST BE NEW FOR OLD, & DEPRECIATION MUST BE TAKEN INTO ACCOUNT.

COMPUTERS & COMPUTER RECORDS

COMPUTERS ARE GENERALLY INSURED UNDER A SPECIAL FORM OF POLICY WHICH NOT ONLY COVERS LOSS OR DAMAGE RESULTING FROM ANY EXTERNAL CAUSE SUCH AS FIRE, EXPLOSION, THEFT, STORM OR FLOOD, BUT ALSO COVERS THE RISK OF ALMOST ANY FORM OF ELECTRICAL OR MECHANCIAL BREAKDOWN WHILE THE EQUIPMENT IS IN USE.

MATERAIL DAMAGE & CONSEQUNETIAL LOSS ARE OFTEN COVERED UNDER SEPARATE SECTIONS OF THE SAME POLICY.

COVER IS GENERALLY PROVIDED UNDER THE MATERIAL DAMAGE SECTION FOR THE COMPLETE COST OF REPAIR OR REPLACEMENT OF THE COMPUTER & ITS RELATED EQUIPMENT AT CURRENT PRICES.

COMPUTERS & COMPUTER RECORDS

COMPUTER SYSTEMS RECORDS ARE COMMONLY COVERED UNDER THE ‘ALL OTHER CONTENTS’ BUT ONLY COVERED:

ONLY FOR THE VALUE OF THE MATERAILS TOGETHER WITH THE COST OF CLERICAL LABOUR & COMPUTER TIME EXPENDED IN REPRODUCING SUCH RECORDS (EXCLUDING ANY EXPENSES IN CONNECTION WITH THE PRODUCTION OF INFORMATION TO BE RECORDED THEREIN) & NOT FOR THE VALUE TO THE INSURED OF THE INFORMATION CONTAINED THEREIN FOR AN AMOUNT NOT EXCEEDING X (POUNDS).

INTANGIBLE LOSS & COST OF COLLECTING THE DATA REQUIRED FOR THE RECREATION OF RECORD IS COVERED UNDER CONSEQUENTIAL LOSS COVER OF COMPUTER POLICY.

RETAILER’S STOCK INDEMNITY BASED ON WHOLSALE PRICE PAID BY THE

INSURED, NOT THE SELLING PRICE (INCLUDE PROFITS). COST PRICE IS TAKEN FROM THE WHOLESALERS’

INVOICES & ALL DISCOUNTS RETAILER HAVE DEDUCTED FROM THIS PRICE.

DEDUCTION MAY HAVE TO BE MADE FOR DEPRECIATION OF STOCK THROUGH AGE, PARTICULARLY FOR GOODS WHICH HAVE BECOME OLD-FASHIONED.

SOMETIMES WHOLSALE PRICE IS HIGHER AT THE TIME OF REPLACEMENT THAN THE ORIGINALLY PAID BY THE INSURED BECAUSE OF INFLATION OR OF OTHER REASONS THEN AN EQUITABLE SETTLEMENT IS MADE DEPENDING ADEQUACY OF SUM INSURED.

MANUFACTURER’S STOCK IF CLAIM OF FINISHED GOODS THEN INDEMNITY

IS GENERALLY BASED ON THE COST OF PRODUCTION WHICH INCLUDES THE COSTS OF RAW MATERIALS, LABOUR, FACTORY OVERHEADS & ADMINISTRATIVE COSTS BUT EXCLUDES PROFITS OR MARKET VALUE OF THE GOODS WHICH EVER IS LESS.

WHERE GOODS ARE ‘IN PROCESS’ AT THE TIME OF LOSS, THE BASIS OF LOSS SETTLEMENT IS THE COST OF THE RAW MATERIALS ALREADY INCORPORATED PLUS THE MANUFACTURING COSTS INCURRED UP TO THE TIME OF FIRE.

CONTRACT PRICE CLAUSE LOSS SETTLEMENTS RELATING STOCK GENERALLY EXCLUDE

ANY ELEMENT OF PROFIT. HOWEVER AGAISNT THE POSSIBLE CANCELLATION OF A CONTRACT OF SALE BY REASON OF A FIRE, THE FOLLOWING CLAUSE IS COMMONLY USED: IT IS HEREBY AGREED & DECLARED THAT IN RESPECT

ONLY OF GOODS SOLD BUT NOT DELIVERED FOR WHICH THE INSURED IS RESPONSIBLE & WITH REGARD TO WHICH UNDER THE CONDITIONS OF THE SALE THE SALE CONTRACT IS CANCELLED BY REASON OF THE FIRE OR ANY OTHER PERIL HEREBY INSURED AGAINST, EITHER WHOLLY OR TO THE EXTENT OF THE LOSS OR DAMAGE, THE LIABILITY OF THE COMPANY SHALL BE BASED ON THE CONTRACT PRICE, & FOR THE PURPOSE OF AVERAGE THE VALUE OF ALL GOODS TO WHICH THIS CLAUSE WOULD IN THE EVENT OF LOSS OR DAMAGE BY APPLICABLE SHALL BE ASCERTAINED ON THE SAME BASIS.

FARM PRODUCE FOR GROWING CROPS THE BASIS IS THE PRICE AT

THE NEAREST MARKET LESS THE COST OF COMBINING OR CUTTING & THRESHING & TRANSPORT. FOR CORN IN STACKS, THRESHING IS DEDUCTED. FOR HAY & STRAW IN STACKS THE BASIS IS MARKET PRICE AT THE FARM, BUT WHERE HAY (GRASS etc.) & STRAW (DRIED STACKS OF CORN) ARE GROWN FOR FARM USE ONLY & IT IS NECESSARY TO REPLACE THEM THE BASIS IS THE PRICE FOR REPLACEMENT AT THE FARM.

FARM IMPLEMENTS THE MEASURE OF INDEMNITY FOR

FARM IMPLEMENTS IS THE VALUE AT THE TIME OF THE LOSS OR DAMAGE BASED ON THE COST OF REPLACEMENT LESS AN ALLOWANCE FOR WEAR & TEAR.

LIVESTOCK BASIS OF SETTLEMENT IS MARKET VALUE AT

THE PLACE WHERE & THE TIME WHEN LOSS OCCURRED.

CLAIMS USUALLY ARISE FROM: LIGHTNING, & ARE SUPPORTED BY VETERINARY

SURGEONS’ CERTIFICATES WHICH SHOW THE CAUSE OF INJURY OR DEATH & THE VALUE OF THE ANIMAL.

IF THERE IS ANY RESIDUAL VALUE IN A CARCASE (DEAD BODY) OR HIDE (SKIN OF AN ANIMAL) A SUITABLE ALLOWANCE MUST BE MADE FOR IT.

ENGINEERING POLICIES VALUATION IN THIS CASE IS DIFFERENT THAN OTHER

INSURANCES BECAUSE OF SCOPE OF THIS INSURANCE LIKE:

FOR BOILER POLICY THE SUM MUST COVER NOT ONLY THE VALUE OF THE BOILER & INSTALLATION COSTS BUT ALSO THE COST POSSIBLE DAMAGE TO SURROUNDING PROPERTY, BOTH BELONGING TO THE INSURED & BELONGING TO OTHER PEOPLE. IT MUST ALSO INCLUDE LIABILITY FOR INJURY TO PERSONS NOT IN THE EMPLOYMENT OF THE INSURED.

IT IS THEREFORE NECESSARY TO CONSIDER THE VALUE & PROXIMITY OF PROPERTY SURROUNDING THE PLANT & THE NUMBER OF THIRD PARTIES LIKELY TO BE IN THE VICINITY.

REINSTATEMENT REINSTATEMENT MEANS THE RESTORATION OF THE

PROPERTY INSURED TO THE CONDITION IN WHICH IT WAS IMMEDIATELY BEFORE THE FIRE/LOSS.

IN THE EVENT OF A TOTAL LOSS IT IS EFFECTED BY REBUILDING THE PREMISES OR REPLACING THE GOODS BY SIMILAR GOODS; WHERE THERE IS A PARTIAL LOSS REINSTATEMENT IS MADE BY EXECUTING THE NECESSARY REPAIRS.

IF INSURANCE POLICY IS EVIDENCE OF A CONTRACT TO PAY MONEY, & MONEY ONLY IN SETTLEMENT OF A CLAIM. THE INSURED CANNOT DEMAND THAT THE INSURERS REINSTATE THE PROPERTY.

REINSTATEMENT REINSTATEMENT MAY TAKE PLACE IN THE

FOLLOWING CIRCUMSTANCES: REINSTATEMENT BY THE INSURERS UNDER THE

TERMS OF THE POLICY; REINSTATEMENT BY THE INSURERS UNDER

STATUTE; REINSTATEMENT BY THE INSURED UNDER

STATUTE OR CONTRACT.

AVERAGE CONDITION IT IS METHOD BY WHICH INSURERS SEEK TO DEFEAT

UNDER-INSURANCE & ITS ADVERSE EFFECTS UPON BOTH INSURED & INSURER. AVERAGE IN EFFECT MAKES THE INSURED A CO-INSURER WHEN UNDER-INSURANCE EXISTS, SINCE THE INSURER UNDER A POLICY WHICH IS DECLARED TO BE ‘SUBJECT TO AVERAGE’ PAYS ONLY THAT PROPORTION OF ANY LOSS WHICH THE SUM INSURED BEARS TO THE VALUE OF THE PROPERTY INSURED AT THE TIME OF THE LOSS. IT MUST BE STRESSED, HOWEVER, THAT AVERAGE ONLY OPERATES WHEN THE POLICY CONTAINS A CLAUSE SPECIFICALLY STATING THAT THE SUM INSURED IS ‘SUBJECT TO AVERAGE’ OR TO ONE OF THE THREE FOLLOWING CONDITIONS.

1. PRO RATA CONDITION OF AVERAGE;2. SPECIAL CONDITION OF AVERAGE;3. THE TWO CONDITIONS OF AVERAGE.

PRO RATA CONDITION OF AVERAGE

THIS IS THE CONDITION IN MOST COMMON USE & READS:

WHENEVER A SUM INSURED IS DECLARED TO BE SUBJECT TO AVERAGE, IF THE PROPERTY COVERED THEREBY SHALL AT THE BREAKING OUT OF ANY FIRE OR AT THE COMMENCEMENT OF ANY DESTRUCTION OF OR DAMAGE TO SUCH PROPERTY BY ANY OTHER PERIL HERE BY INSURED AGAINST BE COLLECTIVELY OF GREATER VALUE THAN SUCH SUM INSURED, THEN THE INSURED SHALL BE CONSIDERED AS BEING HIS OWN INSURER FOR THE DIFFERENCE & SHALL BEAR A RATEABLE SHARE OF THE LOSS ACCORDINGLY.

PRO RATA CONDITION OF AVERAGE

BY ITS USE THE INSURERS PAY ONLY THAT PROPORTION OF A LOSS WHICH IS COMMENSURATE WITH THE PREMIUM THEY HAVE RECEIVED. THUS IF THE PROPERTY CONCERNED IS INSURED FOR

2,000 (POUNDS) BUT ITS VALUE AT THE TIME OF THE LOSS IS 3,000 (POUNDS) THEN THE INSURERS WILL PAY ONLY 2/3RDS OF THE AMOUNT OF THE LOSS. IT IS, OF COURSE POSSIBLE FOR THE FULL SUM INSURED (2,000 (POUNDS)) TO BE PAID IN THE EVENT OF A TOTAL LOSS BUT THIS LEAVES THE INSURED A CO-INSURER FOR THE REMAINING 1,000 (POUNDS).

SPECIAL CONDITION OF AVERAGE

THIS IS ALSO KNOWN AS THE 75% CONDITION OF AVERAGE & APPLIES ONLY TO AGRICULTURAL PRODUCE AT FARMS. IT READS:

WHENEVER A SUM INSURED IS DECLARED TO BE SUBJECT TO THE SPECIAL CONDITION OF AVERAGE, THEN, IF SUCH SUM SHALL AT THE BREAKING OUT OF ANY FIRE OR AT THE COMMENCEMENT OF ANY DESTRUCTION OF OR DAMAGE TO THE PROPERTY BY ANY OTHER PERIL HEREBY INSURED AGAINST, BE LESS THAN THREE-FOURTHS OF THE VALUE OF THE PROPERTY INSURED IN THAT AMOUNT THE INSURED SHALL BE CONSIDERED AS BEING HIS OWN INSURER FOR THE DIFFERENCE BETWEEN THE SUM INSURED & THE FULL VALUE OF THE PROPERTY INSURED AT THE TIME OF SUCH FIRE OR AT THE COMMENCEMENT OF SUCH DESTRUCTION OR DAMAGE & SHALL BEAR A RATEABLE SHARE OF THE LOSS ACCORDINGLY.


THIS CONDITION COMES INTO OPERATION ONLY IF THE SUM INSURED IS LESS THAN THREE-FOURTHES OF THE VALUE, WHEN PRO RATA AVERAGE IS APPLICABLE & THE INSURERES ARE LIABLE ONLY FOR THAT PROPORTION OF THE LOSS THAT THE SUM INSURED BEARS TO THE VALUE.

WHERE THE SUM INSURED REPRESENTS 75% OR MORE OF THE VALUE, INSURERS ARE LIABLE FOR THE FULL AMOUNT OF THE LOSS UP TO THE SUM INSURED, & AVERAGE IS NOT APPLICABLE.

SPECIAL CONDITION OF AVERAGE EXAMPLES:

SUM INSURED = 600 (POUNDS) SUBJECT TO THE SCA

VALUE = 1,000 (POUNDS)LOSS = 300 (POUNDS)THE SUM INSURED IS LESS THAN 3/4TH OF THE VALUE, THEREFORE AVERAGE IS APPLICABLE THE POLICY PAYS 600/1,000 * 300 = 180 (POUNDS)


SUM INSURED = 750 (POUNDS) SUBJECT TO THE SCA

VALUE = 1,000 (POUNDS)LOSS = 300 (POUNDS)THE SUM INSURED IS EQUAL TO 3/4TH OF THE VALUE, THEREFORE AVERAGE IS NOT APPLICABLE.THE POLICY PAYS 300 (POUNDS).


SUM INSURED = 800 (POUNDS) SUBJECT TO THE SCAVALUE = 1,000 (POUNDS)LOSS = 900 (POUNDS)THE SUM INSURED IS GREATER THAN 3/4TH OF THE VALUE, THEREFORE AVERAGE IS NOT APPLICABLE, BUT THE INSURERS’ LIABILITY CANNOT EXCEED THE SUM INSURED; CONSEQUENTLY THE POLICY PAYS 800 (POUNDS/ IT SHOULD BE NOTED THAT LIVESTOCK INSURANCE IS SUBJECT TO AVERAGE, & IT IS USUAL TO IMPOSE A LIMIT OF 1,000 (POUNDS) PER ANIMAL (UNLESS AN ANIMAL IS INSURED INDIVIDUALLY BY A SEPARATE ITEM).

THE TWO CONDITIONS OF AVERAGE

1. WHENEVER A SUM INSURED IS DECLARED TO BE SUBJECT TO AVERAGE, IF THE PROPERTY COVERED THEREBY SHALL AT THE BREAKING OUT OF ANY FIRE OR AT THE COMMENCEMENT OF ANY DESTRUCTION OF OR DAMAGE TO SUCH PROPERTY BY ANY OTHER PERIL HEREBY INSURED AGAINST BE COLLECTIVELY OF GREATER VALUE THAN SUCH SUM INSURED, THEN THE INSURED SHALL BE CONSIDERED AS BEING HIS OWN INSURER FOR THE DIFFERENCE & SHALL BEAR A RATEABLE SHARE OF THE LOSS ACCORDINGLY.


2. BUT IF ANY OF THE PROPERTY INCLUDED IN SUCH AVERAGE SHALL, AT THE BREAKING OUT OF ANY FIRE OR AT THE COMMENCEMENT OF ANY DESTRUCTION OR DAMAGE TO SUCH PROPERTY BY ANY OTHER PERIL HEREBY INSURED AGAINST, BE ALSO COVERED BY ANY OTHER MORE SPECIFIC INSUREANCE, i.e., BY AN INSURANCE WHICH AT THE TIME OF SUCH FIRE OR AT THE COMMENCEMENT OF SUCH DESTRUCTION OR DAMAGE APPLIES TO PART ONLY OF THE PROPERTY ACTUALLY AT RISK & PROTECTED BY THIS INSURANCE & TO NO OTHER PROPERTY WHATSOEVER, THEN THIS POLICY SHALL NOT INSURE THE SAME EXCEPT ONLY AS REGARDS ANY EXCESS OF VALUE BEYOND THE AMOUNT OF SUCH MORE SPECIFIC INSURANCE OR INSURANCES, WHICH SIAD EXCESS IS DECLARED TO BE UNDER THE PROTECTION OF THIS POLICY & SUBJECT TO AVERAGE AS AFORESAID.


THE FIRST OF THE TWO CONDITIONS IS THE PRO RATA ONE, & THE SECOND IS REALLY A CONTRIBUTION CLAUSE. IT SEEKS TO DETERMINE THE ORDER IN WHICH POLICIES SHALL BE CALLED UPON TO MAKE GOOD A LOSS BY STATING THAT IF THE PROPERTY IS COVERED BY A MORE SPECIFIC POLICY THEN THAT POLICY MUST BE THE FIRST TO CONTRIBUTE TO THE LOSS, ANY BALANCE OF LOSS NOT RECOVERED BEING DEALT WITH BY THE POLICY,


ASSUME THERE ARE TWO POLICIES COVERING SIMILAR GOODS. POLICY 1 COVERS GOODS IN WAREHOUSE X WHEREAS POLICY 2 COVERS GOODS IN WAREHOUSES X & Y. POLICY 1 IS MORE SPECIFIC THAN POLICY 2 BECAUSE IT APPLIES TO PART ONLY OF THE PROPERTY COVERED BY POLICY 2 & TO NO OTHER PROPERTY WHATSOEVER. POLICY 2 IS SAID TO BE OF GREATER RANGE THAN POLICY 1. IN THE EVENT OF LOSS AT WAREHOUSE X POLICY 1 MUST CONTRIBUTE FIRST TO THE LOSS & ONLY WHEN POLICY 1 IS EXHAUSTED CAN POLICY 2 BE CALLED UPON TO PAY A SHARE.


EXAMPLE 1 SUM INSUREDPOLICY 1 COVERS A 1,000 (POUNDS)

SUBJECT TO PRO RATA AVERAGE.POLICY 2 COVERS A & B

1,000 (POUNDS)SUBJECT TO THE 2 CONDITIONS

OF AVERAGETHE LOSS IS 500 (POUNDS) IN A

VALUES ARE – A 1,000 (POUNDS)VALUES ARE – B 1,500 (POUNDS)


POLICY 2 IS OF GREATER RANGE THAN POLICY 1 & THE LATTER MUST THEREFORE FIRST MEET THE LOSS TO THE EXTENT OF ITS LIABILITY. THE COVER IS SUBJECT TO AVERAGE WHICH IS, HOWEVER, INOPERATIVE SINCE THE SUM INSURED BY POLICY 1 EQUALS THE VALUE IN A. POLICY 1 THEREFORE PAYS 500 (POUNDS) & POLICY 2 IS NOT BROUGHT INTO CONTRIBUTION.


EXAMPLE 2 SUM INSURED POLICY 1 COVERS A 1,000 (POUNDS)POLICY 2 COVERS A & B 1,000 (POUNDS)

AVERAGE AS IN 1.THE LOSS IS 500 (POUNDS) IN B


POLICY 1 DOES NOT COVER B THEREFORE POLICY 2 ONLY CONTRIBUTE S TO THE LOSS, SUBJECT TO AVERAGE. POLICY 1 IS ADEQUATE TO COVER A.THEREFORE LIABILITY OF POLICY 2 IS:SUM INSURED/NET VALUE PROTECTED * LOSS(i.e. TOTAL VALUE 2,500 (POUNDS) LESS VALUE 1,000 (POUNDS) PROTECTED BY POLICY 1)= 1,000/1,500 * 500 = 333.33 (POUNDS)INSURED LOSES = 166.67 (POUNDS)


EXAMPLE 3 SUM INSUREDPOLICY 1 COVERS A 1,000 (POUNDS)POLICY 2 COVERS A & B 3,000 (POUNDS)

AVEARAGE AS IN 1.THE LOSS IS 500 (POUNDS) IN A


POLICY 1 MUST CONTRIBUTE FIRST TO THE LOSS; THE LIABILITY IS SUBJECT TO AVERAGETHEREFORE POLICY 1 PAYS:SUM ISNURED /VLAUE * LOSS= 1,000/2,000 * 500 = 250 (POUNDS)


POLICY 1 IS INSUFFICIENT TO MEET THE WHOLE LOSS SO THE CONTRIBUTION OF 2 MUST NOW BE ASCERTAINED.POLICY 2 PROTECTS A (SUBJECT TO AVERAGE) TO THE EXTENT OF ANY EXCESS OF VLAUE BEYOND THE AMOUNT OF THE MORE SPECIFIC INSURANCE POLICY 1 & ALSO B.

THEREFORE POLICY 2 PAYS:SUM INSURED /VALUE(LESS VALUE COVERED BY THE MORE SPECIFIC POLICY) * BALANCE OF LOSS= 3,000/6,000 – 1,000 * 250 = 3,000/5,000 * 250 = 150 (POUNDS)


THEREFORE POLICY 1 PAYS 250 (POUNDS)

POLICY 2 PAYS 150 (POUNDS)INSURED LOSS 100 (POUNDS)TOTAL 500 (POUNDS)

AGREED VALUE A ‘VALUED POLICY’ IS ONE WHICH PROVIDES THAT IF

THE PROPERTY INSURED BECOMES A TOTAL LOSS BY THE HAPPENING OF AN INSURED PERIL, THEN THE AMOUNT APYABLE SHALL BE THE SUM INSURED WHICH WAS AGREED BETWEEN INSURER & INSURED AT THE TIME OF EFFECTING THE POLICY.

THE VALUE IS AGREED & IT IS NOT NECESSARY FOR THE INSURED TO PROVE THE EXTENT OF HIS LOSS; HE MUST MERELY PROVE THAT THE LOSS HAS ACTUALLY OCCURRED.

NO ACCOUNT IS TAKEN OF ANY DEPRECIATION OR APPRECIATION WHICH MAY HAVE AFFECTED THE TRUE VALUE SINCE THE INCEPTION OF THE INSURANCE; IF A TOTAL LOSS OCCURS THE AMOUNT PAYABLE IS THE SUM INSURED.

AGREED VALUE VALUED POLICES ARE COMMONLY ISSUED

FOR ITEMS SUCH AS PAINTINGS, SCULPTURES, & OTHER WORKS OF ART, OR FOR ANTIQUES OR ITEMS OF JEWELLERY.

INSURERS GRANT POLICIES COVERING HOUSEHOLD CONTENTS ON A ‘NEW FOR OLD’ BASIS.

CERTAIN INSURERS RESTRICT THE ‘NEW FOR OLD’ BASIS OF SETTLEMENT TO ARTICLES WHICH ARE NOT MORE THAN THREE YEARS OLD AT THE TIME OF THE LOSS OR DESTRUCTION.

LOSS SETTLEMENT & ADJUSTMENTS

IN BIGGER CLAIMS, SETTLEMENT IS GENERALLY PLACED IN THE HANDS OF QUALIFIED LOSS ADJUSTERS OTHERWISE CLAIM DEPARTMENT OF INSURER ADJUST LOSS.

THE CHARTERED INSTITUTE OF LOSS ADJUSTERS (CILA) PROVIDES THAT A LOSS ADJUSTER MUST:

1. AT ALL TIMES RECOGNISE THE RESPONSIBILITY HE OWES TO THE PROFESSION BY STRIVING TO MAINTAIN A HIGH STANDARD IN ALL ASPECTS OF HIS WORK,

2. NOT SEEK TO OBTAIN ANY ADVANTAGE IN THE CONDUCT OF HIS BUSINESS OTHERWISE THAN BY HIS PROFESSIONAL ABILITY, &

3. AT ALL TIMES PRESERVE IMPARTIALITY. SHOULD THERE, IN ANY PARTICULAR CASE, BE CIRCUMSTANCES WHICH IN THE VIEW OF A REASONABLE MAN MIGHT BE REGARDED AS IMPAIRING (WEAKING) OR LIKELY TO IMPAIR HIS IMPARTIALITY THIS SHOULD BE DECLARED TO HIS INSTRUCTING CLIENT BEFORE HE PROCEEDS WITH THE ADJUSTMENT.

VALUE ADDED TAX (VAT) & PROPERTY CLAIMS

NEW BUILDING WORK IS ZERO RATED FOR VAT. HOWEVER, REPAIR WORK & ARCHITECTS’ & SURVEYORS’ FEES CHARGEABLE ON ANY BUILDING WORK ATTRACT VAT.

IN OTHER WORDS, VAT IS PAYABLE ON RECONSTRUCTION OR REINSTATEMENT WORK UNLESS THE BUILDING IS TOTALLY DESTROYED.

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