Week 6

PROPERTY & PECUNIARY INSURANCE WEEK6 PROPERTY INSURANCE 1

ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

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. ZULFIQAR ALI KHAN

THE CALCULATION OF VALUE 

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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 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.

ZULFIQAR ALI KHAN

BUILDINGS 

NORMAL BASIS FOR BUILDINGS IS THE COST OF REPAIR OR REINSTATEMENT. 

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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. ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

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. ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

MACHINERY 

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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.

ZULFIQAR ALI KHAN

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 CIVERS 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.

ZULFIQAR ALI KHAN

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. ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

MANUFACTURER’S STOCK 

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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. ZULFIQAR ALI KHAN

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. ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

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. ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

ENGINEERING POLICIES 

ALTERNATIVE TO PLACING AN INDEMNITY AGAINST EACH ITEM ON AN ENGINEERING POLICY, IT IS POSSIBLE TO HAVE A SINGLE AMOUNT TO COVER TWO OR MORE ITEMS AT ONE LOCATION, THEREBY EFFECTING A REDUCTION IN PREMIUM.  THIS IS KNOWN AS A GROUP INDEMNITY, & ITS PRINCIPAL APPLICATION IS IN CONNECTION WITH BOILER PLANT.  A GROUP INDEMNITY, HOWEVER, CAN ONLY APPLY TO ITEMS USED IN CONNECTION WITH EACH OTHER AT THE ONE STATION.

ZULFIQAR ALI KHAN

SPECIAL CLASSES – COTTON & TOBACCO 

BASIS OF LOSS SETTLEMENT FOR MOST MERCHANDISE IS ITS MARKET VALUE IMMEDIATELY BEFORE THE FIRE.  IN CASES OF CERTAIN RAW MATERIALS LIKE COTTON & TOBACCO WHERE FIRE DAMGE CAUSES AN APPRECIABLE SHORATGE IN THE QUANITITY AVAILABLE THIS MAY RISE IN THE PREVAILING PRICE. IN THESE CASES INSURERS HAVE AGREED WITH THE RESPECTIVE TRADES SPECIAL BASES OF LOSS SETTLEMENT WHICH CAN BE INCORPORATED IN POLICIES TO REPLACE THE MARKET VALUE CLAUSE, PARTICULARLY IN CONNECTION WITH THE INSURANCE OF STOCKS IN PUBLIC MERCANTILE WAREHOUSES.

ZULFIQAR ALI KHAN

SPECIAL CLASSES – COTTON & TOBACCO 

THE CLAUSE IN RESPECT OF TOBACCO READS:  … THE BASIS OF SETTLEMENT SHALL BE THE COST PRICE OF THE TOBACCO (INCLUDING CIGARETTES & CIGARS) DELIVERED INTO WAREHOUSE ON THIS SIDE WITH A FURTHER SUM TO COVER ALL SUBSEQUENT CHARGES, INTEREST, APPRECIATION IN VLAUE & EXTRA COST OF REPLACEMENT, NOT BEING MORE ALTOGETHER THAN THE COST AT WHICH THE DESTROYED OR DAMAGED TOBACCO (INCLUDING CIGARETTES & CIGARS) IF CAPABLE OF REPLACEMENT CAN BE REPLACED WITHIN 30 DAYS AFTER THE DATE OF THE FIRE OR OF THE COMMENCEMENT OF ANY DESTRUCTION OF OR DAMAGE TO SUCH PROPERTY BY ANY OTHER PERIL HEREBY INSURED AGAINST…

ZULFIQAR ALI KHAN

SPECIAL CLASSES – COTTON & TOBACCO 

THE BASIS ADOPTED FOR COTTON IS THE MARKET VALUE OF LIKE COTTON IMMEDIATELY AFTER THE FIRE.  IT IS ALSO CUSTOMARY TO ALLOW INTEREST ON COTTON IF PAYMENT OF LOSS IS NOT MADE WITHIN TEN DAYS OF THE FIRE. TO AVOID HEAVY INTEREST CHARGES THE OFFICES USUALLY MAKE PAYMENTS ON ACCOUNT WHEN THEIR ADJUSTERS CERTIFY SUCH PAYMENTS.

ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

REINSTATEMENT 

REINSTATEMENT MAY TAKE PLACE IN THE FOLLOWING CIRCUMSTANCES: 

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REINSTATEMENT BY THE INSURERS UNDER THE TERMS OF THE POLICY; REINSTATEMENT BY THE INSURERS UNDER STATUTE; REINSTATEMENT BY THE INSURED UNDER STATUTE OR CONTRACT.

ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURERS UNDER THE TERMS OF THE POLICY 

REINSTATEMENT CONDITION POLICY READS AS FOLLOWS: 

IN

STANDARD

FIRE

IF THE COMPNAY ELECTS OR BECOMES BOUND TO REINSTATE OR REPLACE ANY PROPERTY THE INSURED SHALL AT HIS OWN EXPENSE PRODUCE & GIVE TO THE COMPANY ALL SUCH PLANS, DOCUMENTS, BOOKS, & INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE. THE COMPANY SHALL NOT BE BOUND TO REINSTATE EXACTLY OR COMPLETELY, BUT ONLY AS CIRCUMSTANCES PERMIT & IN REASONABLY SUFFICIENT MANNER & SHALL NOT IN ANY CASE BE BOUND TO EXPEND IN RESPECT OF ANY ONE OF THE ITEMS INSURED MORE THAN THE SUM INSURED THEREON.

ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURERS UNDER THE TERMS OF THE POLICY 

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THE OPERATIVE CLAUSE OF THE POLICY GIVES THE INSURERS THE OPTION TO REINSTATE, & THIS CONDITION ESTABLISHES THE RIGHTS THEY WILL HAVE IF THEY EXERCISE THAT OPTION. UNLESS & UNTIL THE INSURERS DO DECIDE TO REINSTATE, HOWEVER, THE CONTRACT REMAINS ONE TO PAY MONEY. THE INSURED CANNOT REFUSE TO ACCEPT A MONEY PAYMENT, & DEMAND REINSTATEMENT. EQUALLY HE CANNOT REFUSE TO ACCEPT REINSTATEMENT IF THE INSURERS ELECT TO REINSTATE.

ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURERS UNDER STATUTE 

THE FIRE PREVENTION (METROPOLIS) ACT 1774, S.83, PROVIDES AS FOLLOWS:  AND IN ORDER TO DETER (PREVENT) & HINDER (TO STOP) ILL-MINDED PERSONS FROM WILFULLY SETTING THEIR HOUSE OR HOUSES OR OTHER BUILDINGS ON FIRE, WITH A VIEW OF GAINING TO THEMSELVES THE INSURANCE MONEY, WHEREBY THE LIVES & FORTUNES OF MANY FAMILIES MAY BE LOST OR ENDANGERED; BE IT FURTHER ENACTED BY THE AUTHORITY AFORESAID, THAT IT SHALL & MAY BE LAWFUL TO & FOR THE RESPECTIVE GOVERNORS OR DIRECTORS OF THE SEVERAL INSURANCE OFFICES FOR INSURING HOUSES OR OTHER BUILDINGS AGAINST LOSS BY FIRE, & THEY ARE HEREBY AUTHORISED & REQUIRED, UPON THE REQUEST OF ANY PERSON OR PERSONS INTERESTED IN OR ENTITLED UNTO ANY HOUSE OR HOUSES, OR … ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURERS UNDER STATUTE 

… OR OTHER BUILDINGS WHICH MAY HEREAFTER BE BURNT DOWN, DEMOLISHED, OR DAMAGED BY FIRE, OR UPON ANY GROUNDS OF SUSPICION THAT THE OWNER OR OWNERS, OCCUPIER OR OCCUPIERS, OR OTHER PERSON OR PERSONS, WHO SHALL HAVE INSURED SUCH HOUSE OR HOUSES, OR OTHER BUILDINGS, HAVE BEEN GUILTY OF FRAUD, OR OF WILFULLY SETTING THEIR HOUSE OR HOUSESS OR OTHER BUILDINGS ON FIRE, TO CAUSE THE INSURANCE MONEY TO BE LAID OUT & EXPENDED, AS FAR AS THE SAME WILL GO, TOWARDS REBUILDING, REINSTATEING OR REPAIRING SUCH HOUSE OR HOUSES OR OTHER BUILDINGS SO BURNT DOWN, DEMOLISHED, OR DAMAGEED BY FIRE, UNLESS THE PARTY OR PARTIES CLAIMING SUCH INSURANCE MONEY SHALL WITHIN SIXTY DAYS NEXT AFTER HIS,… ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURERS UNDER STATUTE 

… HER OR THEIR CLAIM IS ADJUSTED, GIVE A SUFFICIENT SECURITY TO THE GOVERNORS OR DIRECTORS OF THE INSURANCE OFFICE WHERE SUCH HOUSE OR HOUSES OR OTHER BUILDINGS ARE INSURED THAT THE SAME INSURANCE MONEY SHALL BE LAID OUT & EXPENDED AS AFORESAID OR UNLESS THE SAID INSURANCE MONEY SHALL BE IN THAT TIME SETTLED & DISPOSED OF TO & AMONGST ALL THE CONTENDING PARTIES TO THE SATISFACTION & APPROBATION (APPROVAL) OF SUCH GOVERNORS OR DIRECTORS OF SUCH INSURANCE OFFICE RESPECTIVELY. ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURERS UNDER STATUTE 

ACT APPLIES TO HOUSES & BUILDINGS ONLY, & THAT INSURERS MAY BE REQUIRED TO CAUSE THE INSURANCE MONEY TO BE EXPENDED (TO SPEND), AS FAR AS IT WILL GO, IN REBUILDING, OR REPAIRING SUCH PREMISES IN THE FOLLOWING CIRCUMSTANCES: a. WHEN THERE IS REASON TO BELIEVE THAT THE INSURED OR ANY PERSON ACTING ON HIS BEHALF, OR IN COLLUSION WITH HIM, HAS FRAUDULENTLY SET FIRE TO THE PROPERTY WITH THE OBJECT OF OBTAINING THE INSURANCE MONEY.

ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURERS UNDER STATUTE WHEN REQUESTED TO DO SO BY ANY PERSON OR PERSONS INTERESTED IN OR ENTITLED TO THE PROPERTY, FOR EXAMPLE: - OWNERS OR PURCHASERS; - LESSORS OR LESSEES; - MORTGAGORSORS OR MORTGAGEES; - REMAINDERMEN (OWNER) & TENANTS FOR LIFE; - TENANTS FROM YEAR TO YEAR. THE FOLLOWING FEATURES SHOULD BE NOTED: 1. THE RIGHT TO REINSTATEMENT UNDER THE ACT DOES NOT ARISE UNTIL A DISTINCT REQUEST TO REINSTATE THE PROPERTY HAS BEEN MADE TO THE INSURERS. IT IS NOT NECESSARY THAT THE PERSON LODGING THE REQUEST SHOULD BE ONE WHOSE INTEREST IN THE PROPERTY HAS BEEN PREVIOUSLY ACKNOWLEDGEDBY THE INSURERS, AS LONG IN THE PROPERTY HAS BEEN PREVIOUSLY ACKNOWLEDGED BY THE INSURERS, AS LONG AS HE IS , BY VIRTUE OF HIS RELATION TO THE PROPERTY , ENTITLED TO THE BENEFIT OF THE ACT. a.

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ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURERS UNDER STATUTE 1.

2.

3.

4. 5.

THE REQUEST MUST BE MADE BEFORE PAYMENT OF THE LOSS. IN THE EVENT OF THE INSURERS FAILING TO COMPLY WITH THE REQUEST, THE PERSON CLAIMING THE BENEFIT OF THE ACT MAY APPLY TO THE COURTS FOR AN INJUNCTION TO RESTRAIN THE INSURERS FROM PAYING THE INSURANCE MONEY TO THE INSURED. THE INSURERS ARE NOT THEMSELVES OBLIGED TO APPLY THE LOSS MONEY TO REINSTATEMENT IF THE CLAIMANT PROVIDES, WITHIN SIXTY DAYS AFTER THE ADJUSTMENT OF THE LOSS, SUFFICIENT SECURITY TO ENSURE THAT HE WILL LAY THE MONEY OUT IN REINSTATEMENT. THE INSURERS CANNOT BE COMPELLED TO EXPEND UPON REINSTATEMENT MORE THAN THE AMOUNTOF THE INSURANCE. THE INSURED MUST BE ENTITLED TO MAINTAIN A CLAIM UNDER THE POLICY. DESPITE ITS TITLE, THE ACT APPLIES TO THE WHOLE OF ENGLAND & WALES.

ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURED UNDER CONTRACT OR STATUTE 

THE 1774 ACT DOES NOT COMPEL THE INSURERS THEMSELVES TO REINSTATE. AN INSURED MAY BECOMPELLED TO REINSTATE IN THE FOLLOWING CIRCUMSTANCES: 1. WHERE HE HAS ENTERED INTO A CONTRACT TO DO SO. THE CONTRACT MUST CLEARLY STATE THE DUTY OF THE INSURED TO REINSTATE FIRE DAMAGE, AS, FOR EXAMPLE, WILL THE INSURED’S COVENANT (MUTUAL AGREEMENT) IN A LEASE TO REINSTATE FIRE DAMAGE OUT OF THE PROCEEDS FOR A FIRE POLICY. 2. WHERE REINSTATEMENT IS IMPOSED ON HIM BY STATUTE. THIS DUTY IS EXPRESSLY CREATED AS FOLLOWS: ZULFIQAR ALI KHAN

REINSTATEMENT BY THE INSURED UNDER CONTRACT OR STATUTE a.

b.

IN A TRUST OF SETTLEMENT. PROCEEDS OF INSURANCE ON ANY PROPERTY SUBJECT TO A TRUST OR SETTLEMENT MAY BE APPLIED BY THE TRUSTEES IN REINSTATEMENT, SUBJECT TO THE PROVISIONS OF THE TRUSTEE ACT, 1925. IN A MORTGAGE. WHERE A MORTGAGE DEED THE MORTGAGOR MUST APPLY POLICY MONEY IN REINSTATEMENT IF THE MORTGAGEE SO REQUIRES (LAW OF PROPERTY ACT 1925).

ZULFIQAR ALI KHAN

THE REINSTATEMENT MEMORANDUM 

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THIS IS A POLICY EXTENSION WHICH MAY BE GRANTED AT THE REQUEST OF THE INSURED WHEREBY IN CERTAIN CIRCUMSTANCES THE INSURERS WILL BEAR THE COST OF REINSTATEMENT IN FULL WITHOUT ANY DEDUCTION FOR WEAR & TEAR. IT MAY BE APPLIED TO INSURANCES COVERING BUILDINGS, MACHINERY & OTHER PROPERTY BUT NOT STOCK. UNDER THE REINSTATEMENT MEMORANDUM,THE PAYMENT TO BE MADE IS THE COST OF REINSTATEMENT TO A CONDITION EQUAL TO, BUT NOT BETTER OR MORE EXTENSIVE THAN THAT OF THE PROPERTY WHEN IT WAS NEW, ON THE SAME OR ANOTHER SITE, & IN ANY MANNER SUITABLE TO THE REQUIREMENTS OF THE INSURED, PROVIDED THE LIABILITY OF THE INSURER IS NOT THEREBY INCREASED. THE FOLLOWING LIMITATIONS APPLY: ZULFIQAR ALI KHAN

THE REINSTATEMENT MEMORANDUM a.

b.

c.

d.

THE COST OF REINSTATEMENT MUST HAVE BEEN INCURRED IF THE BENEFIT OF THE EXTENSION IS TO BE OBTAINED. THIS DOES NOT MEAN THAT IT MUST HAVE BEEN PAID. IF THE INSURED GIVES AN IRREVOCABLE ORDER FOR A REPLACEMENT MACHINE THE INSURERS WOULD GENERALLY ACCEPT THIS AS AN INCURRED COST SUBJECT (b). THE WORK OF REINSTATEMENT MUST BE CARRIED OUT WITH REASONSABLE DESPATCH (SPEED). WHERE THERE IS PARTIAL DESTRUCTION ONLY, THE MAXIMUM LIABILITY OF THE INSURER IS THE ESTIMATED COST OF REINSTATEMENT IF THE WHOLE OF THE PROPERTY INSURED HAD BEEN DESTROYED. AVERAGE APPLIES IF THE SUM INSURED IS LESS THAN 85% OF THE FULL REINSTATEMENT VALUE OF THE INSURED PROPERTY AT THE TIME OF REINSTATEMENT.

ZULFIQAR ALI KHAN

REINSTATEMENT & INFLATION 

WHEN BUILDINGS OR MACHINERY ARE INSURED ON AN INDEMNITY BASIS (i.e. WITHOUT THE APPLICATION OF THE REINSTATEMENT MEMORANDUM) PROVISION CAN BE MADE FOR INFLATION BY SELECTING A FIGURE FOR THE SUM INSURED WHICH WILL PROVE ADEQUATE EVEN IF A FIRE SHOULD OCCUR ON THE LAST DAY OF THE POLICY PERIOD.  THE FIGURE MUST TEND TO BE GENEROUS IF THE ADVERSE EFFECT OF AVERAGE IS TO BE AVOIDED, BUT AT THE TIME OF EFFECTING THE INSURANCE THE CURRENT RATE OF INFLATION WILL BE KNOWN SO THAT A WORKABLE APPROXIMATION CAN BE MADE.

ZULFIQAR ALI KHAN

REINSTATEMENT & INFLATION 

WHEN INSURANCE IS ARRANGED ON A REINSTATEMENT BASIS, IT BECOMESIMPORTANT TO MAKE PROVISION IN THE SUM INSURED FOR THE FUTURE INFLATION RATE, NOT ONLY DURING THE ANNUAL CURRENCY OF THE POLICY BUT ALSO THROUGHOUT THE ESTIMATED SUBSEQUENT REBUILDING PERIOD (WHICH MAY BE TWO YEARSOR MORE FOR EXTENSIVE PREMISES), & IT IS HERE THAT DIFFICULTY ISENCOUNTERED.  TO OVERCOME DIFFICULTY OF INFLATION RATE CALCULATION FOLLOWING THREE SCHEMES WERE INTRODUCED:  THE VALUTION LINKED SCHEME (VLS)  THE ADJUSTABLE PREMIUM POLICY (APP)  THE NOTIONAL REINSTATEMENT VALUE SCHEME (NRV)

ZULFIQAR ALI KHAN

THE VALUATION LINKED SCHEME 

THIS IS A METHOD WHEREBY AN INSURED IS ENABLED TO MAKE PROVISION FOR ANTICIPATED INFLATION IN REPLACEMENTVALUES (BUILDINGS & MACHINERY) BOTH DURING THE POLICY TERM & ALSO DURING THE ESTIMATED MAXIMUM REINSTATEMENT PERIOD.  ALTHOUGH THE SUM INSURED IS SHOWN IN THE POLICY AS A SINGLE FIGURE, IT IS IN FACT MADE UP OF TWO ELEMENTS KNOWN RESPECTIVELY AS THE BASE VALUE & THE INFLATION PROVISION.  IF AN INSURED ANTICIPATES AN INFLATION RATE OF 20% DURING THE POLICY YEAR, & INFLATION RATES OF 30% & 15% RESPECTIVELY DURING THE TWO FOLLOWING YEAR YEARS, HIS TOTAL SUM INSURED, ASSUMING A BASIC VALUE OF 100,000 (POUNDS), WOULD BE CALCULATED AS FOLLOWS:

ZULFIQAR ALI KHAN

THE VALUATION LINKED SCHEME   

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BASIC VALUE = 100,000 (POUNDS) INFLATION PROVISION FOR POLICY YEAR (20% OF BASIC VALUE) = 20,000 (POUNDS) INFLATION PROVISION FOR NEXT YEAR (30% OF (BASIC VALUE + 20,000 (POUNDS))) = 36,000 (POUNDS) INFLATION PROVISION FOR NEXT YEAR (15% OF (BASIC VALUE + 20,000 + 36,000 (POUNDS))) = 23,400 (POUNDS) TOTAL INFLATION PROVISION = 79,400 (POUNDS) SUM INSURED HENCE = 179,400 (POUNDS) ZULFIQAR ALI KHAN

THE VALUATION LINKED SCHEME 

ITS USE IS RESTRICTED TO THOSE INSURED WHOSE BASE VALUES ARE DERIVEDFROM AN OPINION GIVEN IN WRITING BY A QUALIFIED MEMBER OF ONE OF THE FOLLOWING:   

ROYAL INSTITUTION OF CHARTERED SURVEYORS, INSTITUTE OF QUANTITY SURVEYORS, INCORPORATED SOCIETY OF VALUERS & AUCTIONEERS.  THIS OPINION MUST BE UPDATED PRIOR TO EACH RENEWAL ON A BASIS ADVISED TO THE INSURER, A FULL REVALUATION IS ONLY REQUIRED EVERY FOUR YEARS.  THE SCHEME APPLIES TO BUILDINGS &/OR CONTENTS (EXCLUDING STOCK) & IT IS NOT POSSIBLE TO INCORPORATEAN ESCALATOR CLAUSE.  FULL AVERAGE APPLIES ON THE BASIS OF THE REINSTATEMENT COST AT THE TIME OF REINSTATEMENT.

ZULFIQAR ALI KHAN

THE ADJUSTABLE PREMIUM POLICY SCHEME 

IT WAS DEVISED TO ENCOURAGE AN INSURED TO EFFECT ADEQUATE SUMS INSURED BY APPLYING SPECIAL RATING DISOUNTS & THEN PROVIDING FOR A RETURN OF PREMIUM IN THE EVENT OF AN OVERESTIMATE FOR THE RATE OF INFLATION. IT IS APPLICABLE ONLY TO BUILDINGS (OR BUILDING COMPLEXES) INSURED ON AREINSTATEMENT BASIS FOR A COVER OF AT LEAST 1,000,000 (POUNDS) & WHICH IT IS ESTIMATED WOULD REQUIRE AT LEAST TWO YEARS FOR REBUILDING.  THE BASE VALUE HAVING BEEN DECIDED,THE INSURED MUST ESTIMATE THE RATE OF INFLATION NOT ONLY FOR THE CURRENT INSURANCE YEAR BUT FOR EACH SUCCEEDING YEAR DURING WHICH REBUILDING MIGHT TAKE PLACE.  e.g. REBUILDIGN IS ESTIMATED TO TAKE TWO YEARS, THE INSURED MUST TAKE INTO ACCOUNT NOT ONLY ANTICIPATED INFLATION DURING THE INSURANCE YEAR BUT ALSO DURING THE TWO FOLLOWING YEARS – REFERRED TO AS THE 2ND & 3RD PROJECTED YEARS. THE SUM INSURED IS COMPUTED SIMILARLY AS IN VALUATION LINK SCHEME. ZULFIQAR ALI KHAN

THE ADJUSTABLE PREMIUM POLICY SCHEME 

THE INSURED SHOULD EMPLOY QUALIFIED PROFESSIONALPERSONS TO PROVIDE RELIABLE VALUATIONS. AT EACH RENEWAL THE INSURED MUST PROVIDE ACERTIFICATE FROM SUCH PERSONS SETTING OUT THE REVISED BASE VALUE FOR THE COMING YEAR & THE REVISED INFLATION RATES TO BE ADOPTED.  A SPECIAL FEATURE OF THIS POLICY IS THAT THE PREMIUM IS ADJUSTABLE RETROSPECTIVELY AT EACH RENEWAL. IF THE PREMIUM ACTUALLY PAID FOR THE COVER OF THE PREVIOUS YEAR PROVES TO HAVE BEEN GREATER THAN WAS JUSTIFIED (IN THE LIGHT OF FIGURES SUPPLIED & CERTIFIED BY THE INSURED’S QUALIFIED PROFESSIONAL ADVISERS) THEN A RETURN OF PREMIUM WILL BE ALLOWED, CALCULATED ON A BASIS DETAILED IN THE POLICY BUT SUBJECT TO A LIMIT OF 50% OF THE PREMIUM PAID ON THE INFLATIONARY CONTENT OF THE SUM INSURED. BY THIS MEANS THE INSURED IS ENCOURAGED TO BE GENEROUS IN FIXING HIS SUM INSURED, KNOWING THAT, WITHIN LIMITS, HE WILL BE REIMBURSED FOR AN OVERPAYMENT OF PREMIUM.  IN THE EVENT OF LOSS, AVERAGE IS APPLIED ON THE BASIS OF THE POLICYSUM INSURED (i.e. THE BASIC VALUE PLUS THE FULL INFLATIONARY FACTOR) REGARDLESS OF WHEN REINSTATEMENT IS COMPLETED. ZULFIQAR ALI KHAN

THE NOTIONAL REINSTATEMENT VALUE SCHEME 



THE DECLARED VALUE IS THE INSURED’S ASSESSMENT OF THE NOTIONAL REINSTATEMENT VALUE (i.e., THE COST OF REINSTATEMENT OF THE PROPERTY ARRIVED AT IN ACCORDANC WITH THE REINSTATEMENT MEMORANDUM BUT AT THE LEVEL OF COSTS APPLYING AT THE INCEPTIONOF THE PERIOD OF INSURANCE), TOGETHER WITH ALLOWANCE FOR: a. THE ADDITIONAL COST OF REINSTATEMENT TO COMPLY WITH PUBLIC AUTHORITY REQUIREMENTS; b. PROFESSIONAL FEES; c. REMOVALOF DEBRIS COSTS. THE INFLATION AMOUNT IS AN AMOUNT SELECTED BY THE INSURED TO PROVIDE FOR THE ESTIMATED EFFECTS OF INFLATION DURING BOTH THE PERIOD OF INSURANCE & THE PERIOD NECESSARY FOR REINSTATEMENT FOLLOWING LOSS OR DAMAGE.

ZULFIQAR ALI KHAN

THE NOTIONAL REINSTATEMENT VALUE SCHEME 

THE DECLARED VALUE IS SHOWN IN THE POLICY SPECIFICATION IN BRACKETS BELOW EACH SUM INSURED, & A MEMORANDUM IS INCLUDED EXPLAINING THAT THE BRACKETED FIGURES ‘REPRESENT THE DECLARED VALUE OF EACH OF THE ITEMS SUBJECT TO THE NOTIONAL REINSTATEMENT VALUE CONDITIONS HEREINAFTER STATED’.  TO THE DECLARED VALUE CALCULATED AS ABOVE IS APPLIED THE NORMAL RATE PER CENT INCREASED BY A LOADING ON THE FOLLOWING SCALE:

ZULFIQAR ALI KHAN

THE NOTIONAL REINSTATEMENT VALUE SCHEME SUM INSURED AS A PERCENTAGE OF

THE DECLARED VALUE UP TO

PERCENTAGE

LOADING

125

12.5

140

15

150

17.5

160

20

170

25

180

30

ZULFIQAR ALI KHAN

THE NOTIONAL REINSTATEMENT VALUE SCHEME 



THE RESULTANT PREMIUM IS PROVISIONAL IN THAT IT IS TO BE ADJUSTED ON THE EXPIRY OF EACH PERIOD OF INSURANCE (OR AT THE PRIOR TERMINATION OF THE INSURANCE) IN ACCORDANCE WITH A FORMULA SET OUT IN THE NRV MEMORANDUM. TWO POINTS SHOULD BE SPECIALLY NOTED:  THE INSURED IS REQUIRED TO SUPPLY TO THE INSURERS AT THE INCEPTION OF EACH PERIOD OF INSURANCE THE DECLARED VALUE OF THE PROPERTY INSURED BY EACH ITEM OF THE POLICY FALLING WITHIN THE SCHEME. IN THE ABSENCE OF SUCH A DECLARATION, THE LAST AMOUNT DECLARED BY THE INSURED IS TAKEN AS THE DECLARED VALUE FOR THE ENSUING PERIOD OF INSURANCE.  THE ADJUSTMENT CAN ONLY RESULT IN AN ADDITIONAL PREMIUM. NO RETURN OF PREMIUM IS PROVIDED FOR. ZULFIQAR ALI KHAN

THE NOTIONAL REINSTATEMENT VALUE SCHEME 

THE NOTIONAL REINSTATEMENT VALUE SCHEME DIFFERS FROM THE VALUATION LINKED SCHEME IN THE FOLLOWING RESPECTS: a. A PROFESSIONAL CERTIFICATE REGARDING THE DECLARED VALUE (WHICH BROADLY CORRESPONDS TO THE BASE VALUE) IS NOT REQUIRED. ALL THAT IS NECESSARY IS THE ‘INSURED’S ASSESSMENT’ (ALTHOUGH HE WILL DOUBTLESS SEEK PROFESSIONAL ADVICE PRIVATELY). b. THE PREMIUM IS ADJUSTABLE WITHIN THE PRESCRIBED LIMITS. c. THE SCHEME MAY ONLY BE APPLIED TO AN INSURANCE AT ITS INCEPTION OR AT ITS ANNUAL RENEWAL DATE. d. PROVISION FOR CAPITAL ADDITIONS IS ONLY PERMITTED IN ACCORDANCE WITH THE TERMS SET OUT IN THE NRV MEMORANDUM. ZULFIQAR ALI KHAN

THE NOTIONAL REINSTATEMENT VALUE SCHEME 



IT IS NOT PERMISSIBLE UNDER EITHER THE VLS OR THE NRV SCHEME FOR AN ESCALATOR CLAUSE TO BE INSERTED IN THE POLICY. EACH SCHEME IS, IN EFFECT, SUBJECT TO FULL AVERAGE (i.e., NOT 85%). SO FAR AS THE NRV SCHEME IS CONCERNED, AVERAGE IS INTRODUCED BY A CLAUSE WHICH APPEARS IN THE NRV MEMORANDUM.

ZULFIQAR ALI KHAN

‘DAY-ONE’ BASIS OF REINSTATEMENT COVER 

THE EFFECT OF APPLYING FULL AVERAGE TO EACH OF THE SCHEMES ALREADY DESCRIBED (VLS, APP & NRV) IS TO PUT THE INSURED IN THE POSITION OF HAVING TO ASSESS FUTURE INFLATION TRENDS. IF HE UNDERESTIMATES HE MIGHT FIND HIMSELF UNDERINSURED IN THE POSITION OF HAVING TO ASSESS FUTURE INFLATION TRENDS. IF HE UNDERESTIMATES HE MIGHT FIND HIMSELF UNDERINSURED WHEREAS IF HE OVERESTIMATES HE WILL HAVE PAID EXCESSIVE PREMIUM.  AS IN THE PREVIOUS SWCHEME THE SUM INSURED IS CALCULATED IN TWO PARTS. THE FIRST PART IS DESCRIBED AS THE ‘DECLARED VALUE’ WHICH REPRESENTS THE COST OF REINSTATEMENT APPLYING AT THE INCEPTION OF THE PERIOD OF INSURANCE, PROVIDING FOR THE ADDITIONAL COST OF REINSTATEMENT TO COMPLY WITH PUBLIC AUTHORITIES’ REQUIREMENTS, PROFESSIONAL FEES & DEBRIS REMOVALCOSTS BUT WITHOUT PROVISION FOR INFLATION WHICH MAY OPERATE SUBSEQUENTLY. THIS ‘DECLARED VALUE’ MUST BE NOTIFIED TO THE INSURERS AT THE COMMENCEMENT OF THE INSURANCE & AT EACH SUBSEQUENT RENEWAL. ZULFIQAR ALI KHAN

‘DAY-ONE’ BASIS OF REINSTATEMENT COVER 

THE SECOND PART OF THE SUM INSURED IS AN ADDED PROVISION FOR INFLATION NOT NORMALLY EXCEEDING 50% OF THE ’DECLARED VALUE’. IF THE INSURANCE IS WRITTEN ON A FLOATING BASIS (WHICH MEANS THAT SEVERAL BUILDIGN &/OR MACHINERY ITEMS ARE COVERED IN A SINGLE AMOUNT) THE POLICY MUST INCLUDE A LIMIT OF LIABILITY, WHICH SHOULD NORMALLY NOT EXCEED 150% OF THE ‘DECLARED VALUE’ FOR ANY ONE LOCATION. AVERAGE APPLIES ONLY TO THE ‘DECLARED VALUE’. IT IS THEREFORE ESSENTIAL THAT THIS ADEQUATELY COVERS THE COST OF REINSTATEMENT AT THE COMMENCEMENT DATE OR SUBSEQUENT RENEWAL DATE SINCE THE PROVISION FOR INFLATION WILL NOT MAKE GOOD ANY INITIAL UNDERINSURANCE. AVERAGE IS INCORPORATED IN THE FOLLOWING TERMS:  IF AT THE TIME OF LOSS THE DECLARED VALUE OF THE PROPERTY COVERED BE LESS THAN THE COST OF REINSTATEMENT … (AS DEFINED) … AT THE INCEPTION OF THE PERIOD OF INSURANCE THEN THE INSURERS’ LIABILITY FOR ANY LOSS INSURED HEREBY SHALL BE LIMITED TO THE PROPORTION THEREOF WHICH THE DECLARED VALUE BEARS TO THE COST OF REINSTATEMENT … ZULFIQAR ALI KHAN

‘DAY-ONE’ BASIS OF REINSTATEMENT COVER 

THERE ARE TWO METHODS OF CALCULATING THE PREMIUM. IT MAY BE ON A NON-ADJUSTABLE BASIS IN WHICH EVENT IT IS CALCULATED BY APPLYING TO THE ‘DECLARED VALUE’ NORMAL TERMS LOADED BY 15%. ALTERNATIVELY, THE INSURED MAY ELECT TO ARRANGE THE INSURANCE ON ANADJUSTABLE BASIS UNDER WHICH A PROVISIONALPREMIUM IS CHARGED CALCULATED BY APPLYING TO THE ‘DECLARED VALUE’ NORMAL TERMS LOADED BY 7 ½%. ON THE EXPIRY OF THE PERIOD OF INSURANCE THE PROVISIONAL PREMIUM IS ADJUSTED BY 50% OF THE DIFFERENCE BETWEEN THE PROVISIONAL PREMIUM FOR THE SUBSEQUENT PERIOD OF INSURANCE CALCULATED AT THE TERMS WHICH HAVE APPLIEDDURING THE PERIODUNDER ADJUSTMENT, ALLOWANCES BEING MADE FOR ANY CHANGES IN COVER OR CLAIMS INCURRED DURING THE ADJUSTMENT PERIOD.

ZULFIQAR ALI KHAN

‘DAY-ONE’ BASIS OF REINSTATEMENT COVER 

THE ADJUSTMENT WILL NORMALLY RESULT IN THE PAYMENT OF AN ADDITIONAL PREMIUM SINCE DURING A PERIOD OF INFLATION THE ‘DECLARED VALUE’ FOR ANY RENEWAL PERIOD MUST INEVITABLY BE GREATER THAN THAT ON WHICH THE PROVISONAL PREMIUM FOR THE PREVIOUS YEAR WAS BASED. IF THE ‘DECLARED VLAUE’ IS NOT NOTIFIED TO THE INSURERS BECAUSE OF CANCELLATION OR NON-RENEWAL AN ADDITIONAL PREMIUM OF 7 ½% OF THE PROVISIONAL PREMIUM BECOMES PAYABLE.  IT IS NOT PERMISSIBLE FOR AN INSURANCE ON THE ‘DAY-ONE’ BASIS TO BE SUBJECT TO AN ESCALATOR CLAUSE.

ZULFIQAR ALI KHAN

REINSTATEMENT ANCILLARY CLAUSES 



IN CALCULATING THE DECLARED VALUE FOR THE PURPOSES OF THE NRV SCHEME, ALLOWANCE SHOULD BE MADE FOR: a. THE ADDITIONAL COST OF REINSTATEMENT TO COMPLY WITH PUBLIC AUTHORITY REQUIREMENTS; b. PROFESSIOANL FEES; & c. REMOVAL OF DEBRIS COSTS. THERE ARE, HOWEVER, FACTORS WHICH SHOULD BE TAKEN INTO ACCOUNT IN CONNECTION WITH ALL REINSTATEMENT INSURANCES IF A FULL INDEMNITY IS TO BE RECEIVED. EACH MUST BE INCORPORATED INTO POLICY BY A SPECIFIC CLAUSE, THE IMPORT OF WHICH FOLLWS.

ZULFIQAR ALI KHAN

PUBLIC AUTHORITIES CLAUSE 

THE WORDING COMMONLY USED READS:  THE INSURANCE BY (ITEM No(S) … OF) THIS POLICY EXTENDS TO INCLUDE SUCH ADDITIONAL COST OF REINSTATEMENT OF THE DESTROYED OR DAMAGED PROPERTY THEREBY INSURED AS MAY BE INCURRED SOLELY BY REASON OF THE NECESSITY TO COMPLY WITH BUILDING OR OTHER REGULATIONS UNDER OR FRAMED IN PURSUANCE OF ANY ACT OF PARLIAMENT OR WITH BYE-LAWS OF ANY MUNICIPAL OR LOCAL AUTHORITY.

ZULFIQAR ALI KHAN

PUBLIC AUTHORITIES CLAUSE 

THE EXTENTION WOULD OPERATE, e.g., WHERE AN OWNER OF A BUILDING DAMAGED OR DESTROYED BY FIRE WAS COMPELLED TO REBUILD ON ANOTHER SITE, OR TO REBUILD IN A DIFFERENT WAY, IF REQUESTED BY A LOCAL AUTHORITY WHICH WAS EMPOWERED TO DO SO. STREET WIDENING, DEVEOPMENT PLANS, AND CLEARANCE OF BUILDINGS ARE OTHER CIRCUMSTANCES WHERE THE EXTENSION MAY OPERATE. THE CLAUSE SPECIFICALLY EXCLUDES LIABILITY FOR THE ADDITIONAL COST OF COMPLIANCE WITH THE REGULATIONS: 1. FOR DAMAGE DONE BEFORE THE EXTENSION WAS GIVEN, 2. WHERE NOTICE HAS BEEN SERVED UPON THE INSURED BEFORE THE DAMAGE OCCURS, & 3. FOR UNDAMAGED PROPERTY OR PORTIONS OF PROPERTY.

ZULFIQAR ALI KHAN

PUBLIC AUTHORITIES CLAUSE 

IT FURTHER EXLCUDES LIABILITY FOR ANY CHARGE OR ASSESSMENT ARISING OUT OF CAPITAL APPRECIATION FOLLOWING REINSTATEMENT, & IT IS A REQUIREMENT THAT THE WORK MUST BE CARRIED OUT WITHIN TWELVE MONTHS OF THE DAMAGE UNLESS THE INSURERS GRANT AN EXTENSION IN WRITING.

ZULFIQAR ALI KHAN

PROFESSIONAL FEES CLAUSE 

UNDER THIS CLAUSE THE INSURERS ACCEPT LIABILITY FOR ARCHITECTS’, SURVEYORS’ & CONSULTING ENGINEERS’ FEES NECESSARILY INCURRED IN REINSTATING OR REPAIRING THE DAMAGE. FEES FOR PREPARING CLAIMS ARE NOT COVERED. FEES MAY BE INSURED BY A SEPARTE POLICY ITEM FOR A SPECIFIC SUM INSURED OR MAY BE INCLUDED IN THE ITEMS ON BUILDINGS & CONTENTS (EXCLUDING STOCK), & ARE REQUIRED TO BE IN ACCORDANCE WITH THE CURRENT SCALES OF CHARGES OF THE APPROPRIATE PROFESSIONAL BODIES SUCH AS THE ROYAL INSTITUTE OF BRITISH ARCHITECTS, THE ROYAL INSTITUTION OF CHARTERED SURVEYORS OR THE ASSOCIATION OF CONSULTING ENGINEERS. SUCH FEES ARE NOT AUTOMATICALLY COVERED UNDER A FIRE POLICY; THERE MUST BE A SPECIFIC CLAUSE SUITABLY EXTENDIGN THE POLICY, & THE SUM OR SUMS INSURED MUST BE ADEQUATE TO INCLUDE THEM.

ZULFIQAR ALI KHAN

DEBRIS REMOVAL CLAUSE 



FOLLOWING A SERIOUS FIRE IT IS NECESSARY TO CLEAR DEBRIS FROM THE SITE BEFORE THE WORK OF REPAIR OR REINSTATEMENT CAN BE CARRIED OUT, & IN NORMAL CIRCUMSTANCES THE COST INVOLVED IS INCLUDED IN THE COST OF REBUILDING. IT IS THEREFORE PAID BY THE INSURERS AS PART OF THE BUILDING CLAIM, SUBJECT TO THE ADEQUACY OF THE SUM INSURED. THERE ARE, HOWEVER, INSTANCES WHERE THE REMOVAL OF DEBRIS WOULD NOT BE COVERED BY THE FIRE POLICY.  e.g.,, THE DEBRIS MIGHT HAVE FALLEN ONTO AN ADJACENT ROADWAY OR INTO A RIVER, OR, IN THE CASE OF STOCK SUCH AS METALS, WAXES OR PLASTICS, IT MIGHT HAVE MELTED DURING THE FIRE & SUBSEQUENTLY SOLIDIFIED. THE EXTRA COSTS MAY BE INSURED EITHER BY EXTENDING THE POLICY ITEMS CONCERNED OR BY THE ADDITION OF A SEPARATE ITEM. ZULFIQAR ALI KHAN

DEBRIS REMOVAL CLAUSE 

A SEPARATE ITEM IS ALWAYS NECESSARY IN THE CASE OF STOCK. THE FOLLOWING WORDING WOULD BE EMPLOYED TO EXTEND ITEMS COVERING BUILDINGS & CONTENTS (OTHER THAN STOCK):  IT IS UNDERSTOOD THAT THE INSURANCE BY ITEMS Nos … OF THIS POLICY EXTENDS TO INCLUDE COSTS & EXPENSES NECESSARILY INCURRED BY THE INSURED WITH THE CONSENT OF THE COMPANY IN – 2. REMOVING DEBRIS, 3. DISMANTLING &/OR DEMOLISHING, 4. SHORING UP OR PROPPING  OF THE PORTION OR PORTIONS OF THE PROPERTY INSURED BY THE SAID ITEMS DESTROYED OR DAMAGED BY FIRE OR BY ANY OTHER PERIL HEREBY INSURED AGAINST. ZULFIQAR ALI KHAN

DEBRIS REMOVAL CLAUSE 

A SEPARATE ITEM APPLICABLE ONLY TO STOCK WOULD READ –  ON COSTS & EXPENSES NECESSARILY INCURRED BY THE INSURED WITH THE CONSENT OF THE COMPANY IN REMOVING DEBRIS OF THE PORTION OR PORTIONS OF THE PROPERTY INSURED BY ITEMS Nos … OF THIS POLICY DESTROYED OR DAMAGED BY FIRE OR ANY OTHER PERIL HEREBY INSURED AGAINST … (POUNDS).

ZULFIQAR ALI KHAN

REINSTATEMENT IN ENGINEERING INSURANCE 

THE FOLLOWING IS AN EXAMPLE OF AN ENDORSEMENT TO INTRODUCE REINSTATEMENT INSURANCE INTO AN ENGINEERING POLICY: 

IT IS HEREBY DECLARED & AGREED THAT IN CONSIDERATION OF THE INCREASED PREMIUM AT WHICH THIS POLICY IS ISSUED IN THE EVENT OF DESTRUCTION OF OR DAMAGE TO ANY PLANT DESCRIBED IN THE SCHEDULE OR OTHER PROPERTY BELONGING TO THE INSURED FOR WHICH A CLAIM IS ADMITTED UNDER THIS POLICY THE BASIS UPON WHICH THE AMOUNT PAYABLE UNDER THE POLICY IS TO BE CALCULATED SHALL BE THE REINSTATEMET OF THE PLANT OR PROPERTY DESTROYED OR DAMAGED.

ZULFIQAR ALI KHAN

REINSTATEMENT IN ENGINEERING INSURANCE  2.

3.

‘REINSTATEMENT’ SHALL MEAN – WHERE THE SAID PLANT OR PROPERTY IS DESTROYED  IF A BUILDING THE RE-BUILDING OF THE PROPERTY.  IF NOT A BUILDING ITS REPACEMENT FOR SIMILAR PLANT OR PROPERTY.  IN EITHER CASE IN A CONDITION EQUAL TO BUT NOT BETTER OR MORE EXTENSIVE THAN ITS CONDITION WHEN NEW. WHEN THE SAID PROPERTY IS DAMAGED THE REPAIR OF THE DAMAGE & THE RESTORATION OF THE DAMAGED PORTION OF THE PROPERTY TO A CONDITION SUBSTANTIALLY THE SAME AS BUT NOT BETTER OR MORE EXTENSIVE THAN ITS CONDITION WHEN NEW ZULFIQAR ALI KHAN

REINSTATEMENT IN ENGINEERING INSURANCE 

THE TERM ‘PROPERTY’ IN 1 & 2 ABOVE SHALL NOT INCLUDE STOCK IN TRADE OR GOODS IN PROCESS OF MANUFACTURE. 1.

WHERE THE SAID PALNT IS DAMAGED THE REPAIR OF THE DAMAGED ITEM SO THAT ITS WORKING CONDITON IS SUBSTANTIALLY THE SAME AS THAT IMMEDIATELY BEFORE THE ACCIDENT.  UNDER THE STATNDARD POLICY OF BOILER POLICY, INDEMNITY IN RESPECT OF THE INSURED’S PLANT OR PROPERTY IS LIMITED TO THE COST OF REINSTATEMENT IN A CONDITION EQUAL TO BUT NOT BETTER THAN THAT IMMEDIATELY PRIOR TO THE ACCIDENT. ZULFIQAR ALI KHAN

REINSTATEMENT IN ENGINEERING INSURANCE 

THIS MAY PRESENT A PROBLEM SINCE IT IS OBVIOUSLY IMPOSSIBLE IN MANY INSTANCES TO REPLACE PLANT OR PROPERTY IN EXACTLY THE SAME CONDITION. THUS, IN THE EVENT OF AN ACCIDENT, IT IS POSSIBLE FOR THE INSURED TO HAVE TO FIND A SUBSTANTIAL SUM OVER & ABOVE THAT PROVIDED BY THE POLICY IN ORDER TO REBUILD HIS PROPERTY OR REPLACE HIS PLANT. THE ABOVE CLAUSE IS INTENDED TO DEAL WITH THIS SITUATION & IT AFFORDS A WIDER COVER SIMILAR TO THAT OFFERED IN CONNECTION WITH A FIRE POLICY. THE EXTRA COVER IS SUBJECT TO THE LIMITS OF INDEMNITY SET AGAINST EACH ITEM OR GROUP OF ITEMS IN THE SCHEDULE.

ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

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 COINSURER FOR THE REMAINING 1,000 (POUNDS). ZULFIQAR ALI KHAN

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.

ZULFIQAR ALI KHAN

SPECIAL CONDITION OF AVERAGE 

THIS CONDITION COMES INTO OPERATION ONLY IF THE SUM INSURED IS LESS THAN THREEFOURTHES 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.

ZULFIQAR ALI KHAN

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) ZULFIQAR ALI KHAN

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 3/4TH OF THE VALUE, THEREFORE AVERAGE IS NOT APPLICABLE. THE POLICY PAYS 300 (POUNDS).

ZULFIQAR ALI KHAN

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 3/4TH 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).

ZULFIQAR ALI KHAN

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. ZULFIQAR ALI KHAN

THE TWO CONDITIONS OF AVERAGE 1.

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. ZULFIQAR ALI KHAN

THE TWO CONDITIONS OF AVERAGE EFFECTS OF THESE CONDITIONS ARE 

FOLLOWS: a.

b.

AS

IN A POLICY COVERING WHAT ARE TERMED ‘MERCANTILE’ RISKS, i.e., GOODS AT DOCKS OR AT PUBLIC WHARVES (PORTS) OR WAREHOUSES. IN A POLICY WHERE THERE ARE SPECIFIC ITEMS COVERING THE CONTENTS OF INDIVIDUAL BUILDINGS & A FLOATING ITEM COVERING CONTENTS IN ALL BUILDIGNS. OFTEN SUCH AN ARRANGEMENT IS REQUIRED WHERE THERE ARE VARIATIONS IN THE DISTRIBUTION OF THE PROPERTY COVERED & IT IS INTENDED THAT THE FLOATING ITEM SHALL BE REQUIRED TO CONTRIBUTE TO A LOSS ONLY AFTER THE SPECIFIC ITEM HAS BEEN EXHAUSTED.

ZULFIQAR ALI KHAN

THE TWO CONDITIONS OF AVERAGE 

EXAMPLE: COL.1

COL.2

MINIMUM

MAXIMUM

BUILDING X

5,000 (POUNDS)

10,000 (POUNDS)

BUILDING Y

5,000 (POUNDS)

15,000 (POUNDS)

BUILDING Z

10,000 (POUNDS)

25,000 (POUNDS)

TOTAL

20,000 (POUNDS)

50,000 (POUNDS) ZULFIQAR ALI KHAN

THE TWO CONDITIONS OF AVERAGE IF THE PROPERTY IS TO BE INSURED FULLY IN 

INDIVIDUAL BUILDINGS, A SUM INSURED OF 50,000 (POUNDS) IS NECESSARY, ALTHOUGH THERE MAY NEVER BE MORE THAN, SAY, 35,000 (POUNDS) AT RISK AT ANY ONE TIME IN ALL THREE BUILDINGS. TO INSURE FOR 50,000 (POUNDS) WOULD OBVIOUSLY INVOLVE THE INSURED IN CONSIDERABLE & UNNECESSARY EXPENSE, SO HE IS ALLOWED TO EFFECT INSURANCE OF 20,000 (POUNDS) IN INDIVIDUAL BUILDINGS AS IN COL.1 PLUS A FLOATER FOR 15,000 (POUNDS), SUBJECT TO THE TWO CONDITIONS OF AVERAGE, THUS MAKING THE MAXIMUM LIABILITY OF 35,000 (POUNDS).

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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, ZULFIQAR ALI KHAN

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. ZULFIQAR ALI KHAN

THE TWO CONDITIONS OF AVERAGE 

IF POLICY 1 COVERS GOODS IN WAREHOUSES A & B, & POLICY 2 COVERS GOODS IN WAREHOUSES B & C THE SECOND CONDITION DOES NOT APPLY. POLICY 1 CERTAINLY COVERS PART OF THE PROPERTY COVERED BY POLICY 2 BUT IT COVERS OTHER GOODS IN ADDITION. SUCH INSURANCES ARE SAID TO BE OF INDEPENDENT RANGE.

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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)

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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.

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THE TWO CONDITIONS OF AVERAGE EXAMPLE 2 SUM INSURED 

POLICY 1 COVERS A POLICY 2 COVERS A & B

1,000 (POUNDS) 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) ZULFIQAR ALI KHAN 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) ZULFIQAR ALI KHAN

THE TWO CONDITIONS OF AVERAGE POLICY 1 IS INSUFFICIENT TO MEET THE WHOLE 

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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)

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THE TWO CONDITIONS OF AVERAGE 

THEREFORE 

POLICY 1 PAYS POLICY 2 PAYS INSURED LOSS TOTAL

250 (POUNDS) 150 (POUNDS) 100 (POUNDS) 500 (POUNDS)

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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.

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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. 

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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.

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FIRST – LOSS INSURANCE 

FIRST – LOSS POLICIES ARE SOMETIMES IN DEMAND WHERE A PROPOSER FEELS THAT ANY LOSS HE MAY SUSTAIN FROM A CERTAIN PERIL CANNOT AMOUNT TO MORE THAN A FRACTION OF THE VALUE AT RISK. UNDER SUCH POLICIES, WHEN A LOSS OCCURS THE INSURERS WILL PAY UP TO THE SUM INSURED WITHOUT CONSIDERATION OF THE TOTAL VALUE AT RISK. INSURERS GENERALLY DO NTO FAVOUR POLICIES BASED ON OTHER THAN FULL VALUES, BUT WHEN THEY DO AGREE TO SUCH COVER THEY COMMONLY CHARGE A COSIDERABLY HIGHER RATE THAN THE NORMAL. THE CHANCE OF A TOTAL PAYMENT IS MUCH GREATER, & THE INSURED MUST EXPECT TO PAY AN INCREASED COST IN CONSEQUENCE.

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FIRST – LOSS INSURANCE 

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FIRST – LOSS POLICIES ARE COMMON IN THEFT INSURANCE BUT ARE SELDOM ISSUED BY FIRE & SPECIAL PERILS. INSURERS ISSUE FIRST – LOSS POLICIES FREELY IN RESPECT OF THEFT INSURANCE, BECAUSE IN MANY CASES IT CAN REASONABLY BE ARGUED THAT PARTICULAR GOODS ARE TOO BULKY OR TOO HEAVY FOR A THIEF TO TAKE AWAY MORE THAN A SMALL PROPORTION GOODS ARE TOO BULKY OR TOO HEAVY FOR A THIEF TO TAKE AWAY MORE THAN A SMALL PROPORTION OF THE TOTAL AT RISK. ZULFIQAR ALI KHAN

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.

2.

3.

AT ALL TIMES RECOGNISE THE RESPONSIBILITY HE OWES TO THE PROFESSION BY STRIVING TO MAINTAIN A HIGH STANDARD IN ALL ASPECTS OF HIS WORK, NOT SEEK TO OBTAIN ANY ADVANTAGE IN THE CONDUCT OF HIS BUSINESS OTHERWISE THAN BY HIS PROFESSIONAL ABILITY, & 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.

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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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