PROPERTY & PECUNIARY

INSURANCE
WEEK 16
PROPERTY 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 INSURERS 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.


RETAILERS 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.
MANUFACTURERS 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.
SPECIAL CONDITION OF
AVERAGE
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 3/4
TH

OF THE VALUE, THEREFORE AVERAGE IS
APPLICABLE
THE POLICY PAYS 600/1,000 * 300 = 180
(POUNDS)
SPECIAL CONDITION OF
AVERAGE
SUM INSURED = 750 (POUNDS) SUBJECT
TO THE SCA
VALUE = 1,000 (POUNDS)
LOSS = 300 (POUNDS)
THE SUM INSURED IS EQUAL TO 3/4
TH
OF
THE VALUE, THEREFORE AVERAGE IS
NOT APPLICABLE.
THE POLICY PAYS 300 (POUNDS).
SPECIAL CONDITION OF
AVERAGE
SUM INSURED = 800 (POUNDS) SUBJECT TO THE
SCA
VALUE = 1,000 (POUNDS)
LOSS = 900 (POUNDS)
THE SUM INSURED IS GREATER THAN 3/4
TH
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.
THE TWO CONDITIONS OF
AVERAGE
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 TWO CONDITIONS OF
AVERAGE
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,
THE TWO CONDITIONS OF
AVERAGE
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.
THE TWO CONDITIONS OF
AVERAGE
EXAMPLE 1 SUM INSURED
POLICY 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 AVERAGE
THE LOSS IS 500 (POUNDS) IN A
VALUES ARE A 1,000 (POUNDS)
VALUES ARE B 1,500 (POUNDS)
THE TWO CONDITIONS OF
AVERAGE
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.
THE TWO CONDITIONS OF
AVERAGE
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
VALUES ARE A 1,000 (POUNDS)
VALUES ARE B 1,500 (POUNDS)
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)


THE TWO CONDITIONS OF
AVERAGE
EXAMPLE 3 SUM INSURED
POLICY 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
VALUES ARE A 2,000 (POUNDS)
VALUES ARE B 4,000 (POUNDS)
POLICY 1 MUST CONTRIBUTE FIRST TO THE
LOSS; THE LIABILITY IS SUBJECT TO
AVERAGE
THEREFORE POLICY 1 PAYS:
SUM ISNURED /VLAUE * LOSS
= 1,000/2,000 * 500 = 250 (POUNDS)
THE TWO CONDITIONS OF
AVERAGE
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)

THE TWO CONDITIONS OF
AVERAGE
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.