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Client Ref.: 110755
Client and project challenges
Spanish company that formulates, manufactures and markets chemical products and spray paints. In the early 80’s, the first spray paint manufactured in Spain came out of its facilities.
The client keeps most of its stock in its own warehouses, but for agility in the supply chain, it deposits part of it in the facilities of a logistics operator.
A fire caused the total destruction of the logistician’s warehouse, thus burning the stocks that different companies had deposited there. The insurer’s loss adjuster interpreted that there was underinsurance in the sum insured for stocks and that there was also no coverage for the Loss of Profits guarantee.
Our work and approach
In the design of the policy we contemplated the existence of own goods both in the Insured’s warehouses and in third parties’ situation, specifying the logistic operator where the loss occurred, and detailing the fire protections in both locations.
We prepared the inventory of the inventories present in each risk situation, comparing them with the Sums Insured in the policy to demonstrate that the policy design was correct.
For the Loss of Profit coverage, our client incurred production cost overruns to remanufacture the stock they had committed to their customers. Our work was to identify and assess these cost overruns: temporary rental of another logistics warehouse, overtime of their personnel, extra transportation costs, re-labeling of products, among others.
Results
The policy had the guarantee of the Insured’s Expert who was of great help in preparing the documentation required by the Insurer. We obtained full indemnity for property damage without application of the proportional rule for underinsurance.
We rejected the Insurer’s initial criterion that considered the Loss of Profits as not indemnifiable because the loss had not occurred in the Insured’s industry.
Our argument was accepted: the Loss of Profits is indemnifiable when there is an economic loss derived from a fire loss in an insured risk situation of the Insured or of third parties, since this is established in the clauses we designed in the policy.
The client received an indemnity in excess of €1M, with full satisfaction with our management.
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