Background
In April 2015, Your Claim was appointed by a large seafood processing, wholesaling and exporting business to assist with damage sustained from a cyclone.
The claim comprised damage to property in excess of $2,500,000 with a significant portion of the repairs, some $860,000 comprising damage to the overhead electrical distribution network at the property.
Insurers Position
The Insured obtained a quotation for $860,000 to reinstate the electrical network back to exactly the way it existed prior to the loss, that being with the use of power poles “above ground”.
The Insured however obtained an alternative quotation to put back the distribution network “below ground” at a cost of $560,000.
The latter reinstatement option being the distribution network below ground was the Insured’s preferred way forward for a number of reasons and this was presented and discussed with the Insurer.
The Insurer held the view that reinstatement of the electrical distribution network below the ground would satisfy the reinstatement provision in the policy. They advised that if the Insured proceeded with this “less costly” form of reinstatement, then that would be their full entitlement under the policy as they have been returned to the same position that they had prior to the loss, that being with a fully functioning electrical distribution network.
YourClaim Submission
Our office argued that this was not in line with the entitlement offered in the Insured’s ISR policy.
We presented a supported submission setting out that the Insured was entitled to reinstatement of the distribution network as was, meaning reinstatement above ground with a claim of $860,000.
We also then set out that the Insured was entitled to reinstate in any manner suitable to their requirements as set out in paragraph (a) of the Reinstatement and Replacement provisions of the ISR policy.
We argued that whilst the Insured would only incur $560,000 towards reinstating their distribution network, there was still a $300,000 “credit” available to the Insured to spend in any manner suitable to their requirements, as set out in the above provision.
We acknowledged that this entitlement of a further $300,000 was only payable to the Insured in full if they “actually incurred” the funds in reinstating insured property.
Settlement
Insurers initially resisted this approach.
Following numerous meetings and correspondence between the parties, a negotiated settlement was agreed with this aspect as well as other more minor sections of the claim, however that settlement included the majority of the $300,000 entitlement in the policy.
This very issue comes up on numerous claims and is often overlooked.
In this instance the Insured was able to utilise the funds obtained to undertake other works to their property, all of which were within the confines of the policy provisions.
