Chapter 9 - Measuring the loss: the principal of indemnity Flashcards
What are pecuniary insurances
BI insurance which cover loss of ‘profit’ from PD
Looks at past years data and trends
Where are liability insurances normally calculated
‘Out of court’ settlement plus costs which arise in connection of the claim (e.g. lawyers fees, medical expenses’
What is a franchise
Similar to an excess - there is no liability for a loss if it is less than the excess - but once it exceeds this you are liability for the full loss including this ‘excess’
When can you receive more than indemnity
Cover on a reinstatement basis
‘New for old’ cover
Agreed value cover
Partial losses under ‘valued’ policies
Methods of providing indemnity
Payment of money
Reinstatement - insurers rebuilt property
Repair
Replacement - e.g. broken glass
What is a ‘constructive total loss’
In Marine only
Where subject matter is damaged but not totally destroyed, but not worth repairing (will be abandoned), for example because:
- Cannot be recovered
- Repair will exceed value
What is the general measure of indemnity
Value at the date of the loss and at the place of loss
Measure of indemnity for building
Cost of repair/reconstruction at the time of loss, but i most cases with a deduction for betterment
Measure of indemnity for machinery/equipment
The cost of repair less an allowance for wear and tear
and if not possible - the cost of replacement, less wear and tear (based on second hand market price)
Measure of indemnity for manufacturers stock
Cost, at the time and place of the loss - to replace/return the goods to the condition they were before the loss
With raw materials - this includes the cost including delivery to site or with other materials will be the cost of labor and other reproducing costs
Measure of indemnity for wholesale/retail stock
Cost of replacing stock, plus transport/handling costs
Measure of indemnity of farming stock
Local market price - based of merchant spot market - so essentially can make a profit
If a boat is damaged but not totally destroyed, but the insured has abandoned their rights of the boat to the insurer but did not serve a formal notice of abandonment. If they submit a claim, the insurer is entitled to classify as a
partial loss
Which items are most commonly insured on an agreed value basis?
o Antiques
o Ships
o Works of art
If a claim is settled on a ‘new for old’ policy by payment of money, the insured:
can use the money to reinstate the property or it will otherwise be settled on an ordinary indemnity basis.
