This week (17/09/16 – 23/09/16) the Product Safety Australia updates include recalls from the below:
I received this question and as I have had a few on this subject before I thought it time to post an article on the topic. The question was:
Good Afternoon Allan
Just wondering if you can clarify the following:
I currently have a builder insured on a Contract Works policy. Due to the client wanting extra cover (Contract Works) and also due to the increase turnover and payments to sub-contractors. A combined contract works and liability policy is going to be more economical for the client.
The current policy is an Occurrence policy however the contract works policy only commences when the client starts a new project in the insured period.
If I was to cancel the Liability policy at completion of the clients current job and commence liability with the contract works policy would the Contract Works policy respond in a similar scenario down below.
1st Jan 2016 Insured with Liability policy – A plumber welds a join in copper pipe
1st Jan 2017 Policy Cancelled and Liability moved to contract works policy
1st Jan 2018 The weld done on 1st Jan 2016 comes undone and floods house
Would the the Liability policy respond as the weld was done while they held cover? or
Would it be the responsibility of who holds the liability at the time of occurrence?
Craig [surname and email provided]
My answer was as follows:
There are a few traps if relying upon a mixed program encompassing Trade Policies and Site Specific Contract Works Policies. There is the risk that there will be no finished products cover and liability cover for other premises, property and activities such as yards and storage premises and marketing activities may not be covered if the Business is not properly described in the Schedule.
Regarding your question about the weld, it should be remembered that liability policies usually cover bodily injury and property damage occurring during the period of insurance. That is the loss, injury or damage has to occur when the policy is in force NOT when the faulty work or negligent act too place, which could have been years before.
The wording of the Annual Contract Works Policy in standard form including the method of assessing the premium suggests that the intention of Contract Works policy is to provide indemnity only in respect of contracts carried out during the period of the policy or otherwise named in the Schedule and for which premium has been paid.
To cover the loss occurring on 1 January 2018, the policy will need to be arranged on the basis that the cover includes works and liability arising therefrom carried out prior to the date of inception of the Annual Contract Works Policy.
An Annual Contract Works Policy is obviously superior to current arrangements but in your negotiations with the Insurer you need to focus on the following points.
Hope this helps and explains what can be quite a complicated area of insurance.
I do love it when I hear the television ads say insurance is easy! What a load of rot.
The title of the email has significance to me. When I was working on “It Will Never Happen to Me! – the strategic management of crisis in business” I needed some help to finish it as I was stretched with my workload at the time. The daughter of a long standing friend, (the man that programmed v.1 of PolicyComparison.com) Caitlin Fry offered to help and she provided great assistance converting my doctoral thesis into a book that the industry could benefit from. Caitlin now owns and runs a book store in the Adelaide Hills called Jeff’s Books. She wrote to me following damage to her store. She had not read my recent blog about my own claim but I thought it was worth sharing her observations about her loss and claim experience.
Just letting you know I gave your book a plug on the Jeff’s Books Facebook page this week because I had to use the lessons from it!
On Tuesday night the hairdressers next to the bookshop had the pipes burst on their hair washing station, resulting in water pouring out the front door at 2am – they have a lino floor, so just broomed it out and didn’t think to let us know. This was on the Wednesday (when we didn’t really notice anything) – so by Thursday morning the water had soaked through half our shop carpet, having taken that long to soak through the bookcases.
Luckily, we haven’t had many books actually in contact with the water, but we’re now just waiting to see if sitting in bookcases on wet carpet will lead to damp damage – meanwhile I’ve been emptying bookcases like mad (of course Al’s [husband] away at work at the moment!)
But, as per your book, I’ve been keeping the attitude positive, offering people a go at belting out 80’s power ballads into the blowers and even had trouble keeping customers away (because so many secondhand bookstores are discombobulated areas of stacked books all over the floor they don’t actually realise there’s something wrong.)
While the actual loss will be minimal, it’s likely the carpeting will need replacing, and with 25,000 odd books that’s easier said than done!
Meanwhile, the hairdressers realise their flooring would be affected by the water – so while I got blowers and humidifiers onto our floor within hours of finding the water, yesterday was the first time they realised their floor was bubbling and mortar-work under their front door has crumbled. (The old theatre was built in 1935 and it’s Jarrah boards, so it’s just whatever’s over the top that’s affected.) Given they had a robbery in the last 12 months, I don’t envy them their premiums – and I’m glad they’re able to continue trading because I get secondary trade from them (such as people killing time before/after appointments or husbands browsing while “the Mrs” gets her hair done) [We of course know this as loss of attraction]
We have the benefit of having the same landlord for the whole building and as there’s an insurance broker one street over the landlord and hairdressers have the same broker, insurer and loss adjuster we do – which has made things a lot quicker and easier.
There is one thing I would maybe want to pass on to others with commercial tenancies (I’ve been chatting to my fellow secondhand bookshops with more specific “lessons learned”) – the responsibility for flooring can go either way. In some leases it’s considered a part of the building, and therefore the responsibility of the landlord. In others it’s considered a shop fitting, and therefore the responsibility of the tenant.
And in others (such as ours) it’s not actually spelled out – and even though the flooring is being replaced under our insurance, the flooring company still need permission from the landlord to get started. [A very valid point that Catlin makes. It is too late after the event to find out that one party or the other was supposed to insure it and no one did].
Naturally a lot of my friends have wanted to help, but given the work required and the location of the shop they’ve assumed they can’t – however what’s been really great is the other support, such as my parents minding Matilda, cooking me dinner, helping with washing at home etc. I was able to get hold of the original Jeff, who was able to tell me about the shop set up prior to him setting it up, and how he secured the bookcases to the walls. We’ve also had the benefit of sharing a building with butchers – once I’d emptied bookcases, they were able to move them easily because they are trained and used to shouldering carcasses, so are great at lifting things safely – they also had the waterproof brooms to lend the hairdressers! [As an industry we rarely take the time to thank those that help our insureds even though they mitigate the loss. In some cases I have worked with the insurer to fund a BBQ or the like as a thank you. The cost is small but the publicity for the insurer and brand insurance is great].
We’re meeting with the flooring people tomorrow (I wanted to wait until Al was home) to assess timings for getting things back to normal – luckily being such a big shop premises we can carpet it in halves, without having to empty the entire premises or hire storage for stock. While the flooring people can help with packing and unpacking, an alternative I was considering was to make a donation to the local Friends of the Library to get some of their volunteers, who often help with re-shelving in the library, so that we might be able to help a local community group out of this too.
So, I hope to continue plugging your book, and you’ll be pleased to know no Churchills [the author she knows I will always buy] were harmed in the process!
I naturally offered any assistance including Erik Kroon from our Adelaide office should she need any help with her claim.
That was email 1. The follow up today was:
Just as an update, today we’re finally getting a visit from the re-carpeters to measure up and provide a quote to the insurer, so I’m hoping we can get the carpet started before Al returns to work!
I was a little surprised that the re-carpeters were just told, “Go get a quote from this address” – they hadn’t even been told it was a commercial premises. If the re-carpeters maybe knew it was a commercial premises and the floor measurements I provided the insurer then some things could already be started (ie as soon as I mentioned it was a shop the guy immediately said, “Oh, so I’ll be bringing the other swatch-book”)
The emergency flooring guy who removed the carpet would have been able to provide details of the carpet he removed (as it’s like for like), as well as other information such as age of carpet, the flooring beneath the carpet, confirmed the measurements, etc. – so a 30 second chat would have saved a lot of time.
It’s been quite frustrating because we’ve virtually had to stop trading for a fortnight while the insurer argues with itself (as we have the same broker and insurer as the hairdressers and the landlord) – they said from the beginning there had to be new carpet and we could have got the process started while they sorted out where to send the invoice.
There must be something about bookshops because I just found out (because they’re still new to the internet) the Adelaide Booksellers had a flooded storeroom around the same time!
But, on the plus side, the lovely girls at Three Four Knock on the Door (a children’s bookshop in Port Melbourne) this week won the “Best of Port 2016” award (children’s category), despite losing everything in a fire last August – http://www.threefour.com.au/
Caitlin’s dad, Ian Fry is one of the most enthusiastic disciples of lessons learned and has done a lot to shape my thinking in this space. We really do need to listen more to the feedback from our Insured’s as to what they think we do right and what they think we can improve from. Are we asking the right questions and what do we do with the answers?
This applies equally to catastrophe response or business as usual claims.
For example, Caitlin’s experience with trades is seen so (far too) often. I am sure we can streamline the process of appointing trades and just by giving meaningful instructions save time and money and of course look like we know what we are doing.
As it is the same insurer on both the building and both tenants with no suggestion that anyone is under insured, do we really have to bother and or stress the Insureds with who is going to pay. Just with a change of a few words we could look much more caring and professional.
If we do not start listening to our customers and taking and actioning the lessons learned will anything ever change?
As Caitlin mentioned Churchill, I draw on his view of looking at things. We can either be a pessimist or an optimist about the current state of claims handling.
I am optimistic, I believe it will only take one firm to start to delivers half reasonable service and they will disrupt the status quo. They will gain market share, increase their retention rate and reduce their average claim cost all in the one go. By doing things right and concentrating on the customer and paying a fair price to trades, loss adjusters and other service providers they will get preferential treatment which in turn will deliver a better customer service for their clients which in turn will drive more growth and profit and so it goes.
I received the following question from a broker:
I have been through your website to see if there is a reference I can use to provide to clients outlining the difference between Building Replacement Value and Purchase price and why you shouldn’t set the Purchase price as the Building Sum Insured.
I’m fully aware of the difference and reason but I often have clients when reviewing the sum insured after we provide a Cordells Replacement report questioning the value as it is a lot more than what they may have paid for the property. I can explain this but just want a better more succinct explanation I can use to put in writing.
I would appreciate it if you could refer me to any Material that references this
Simon [surname and email provided]
The simple answer here is the answer is based not on the market price or selling price of the building, but rather its replacement value.
While I assume the question is in respect of a home, the principle is the same for a commercial or industrial building as well. When you purchase a home you are purchasing not only the building but also the land.
Insurance policies specifically exclude land and only cover the structural improvements on the land which includes the building itself, pathways, fencing and a few other things that would transfer with the sale of the home such as a swimming pool, flag pole or other permanent structure.
This means that the market value of a home with its land could in fact be higher than the replacement value of the home itself and its structural importance.
Depending on where the home is located however, and the age of the home, its condition and a number of other factors, the cost of physically replacing or rebuilding the structural improvements could be greater than its market value.
When you insure your building you also have to consider things such as the cost of upgrading the building to current building regulations, removal of debris and the rental value of the property which depending on the insurance policy could be in included in the sum insured or one or more of these benefits could be provided as an additional benefit, over and above the sum insured but always limited typically to a percentage.
A broker contacted me concerned that the policy which one of his staff had arranged contained a restriction in a case where a piece of equipment has suffered a machinery breakdown and is unable to be repaired, as the parts are no longer available, and the policy limited the Insurers liability to the value of the parts if they were available.
The client was expecting a replacement piece of equipment to the nearest modern equivalent.
As the fire section of most business pack and home and contents policies are now issued on a reinstatement replacement condition, it is easy for us to fall into the trap of believing that this more generous basis of settlement than the basic principle of indemnity is available in other classes of general insurance as well.
As this broker and their client learned, this is not necessarily the case with machinery breakdown policies, whether they be standalone policies or part of a business pack.
Doing a search on PolicyComparison.com, I found that around half the policies issued in Australia have a restriction in the Machinery Breakdown coverage that limits the cost of repairs to the machine, where parts are no longer available to the cost of the parts if they were available. This in itself can create a conflict for how can you price something that is no longer available? Putting that aside, as with all general insurance products, it is important to understand the coverage afforded by the policy and make a decision on the needs of the Insured.
For the benefit of readers, I attach a product feature comparison on this issue taken from PolicyComparison.com machinery-comparison-from-policycomparison
The last point I would make is that brokers who are a member of a cluster group, should not be lulled into believing their policy is necessarily superior in this area as your policies may well contain the same restriction.
The following is a sad tale that was reported in the Digital Age News (we can not call them newspapers any more). This sort of thing sickens me to the core. The moral of the story is that bad things happen to good people. I hear a lot of people say “I cannot afford insurance”. I say you cannot afford not to, as these farmers found out the hardest possible way.
Secondly, insurance is now cheaper and there is simply no excuse. I and many others fought hard and long to get the Victorian Government to remove Fire Services Levies in Victoria and so premiums for fire insurance on farm properties has dropped by more than 50% just in the drop in taxes alone.
While I explained why I do not donate to fire victims in an earlier post, I do not want this to in any way stop anyone else from donating if you feel so compelled.
While I have the highest regard for our police force and those men and women who serve and protect us all, it is disappointing that the system let us down and we see yet another reason why our state system is sometimes more detrimental than beneficial. It is a lot more than just mismatched rail gauges as we were taught at school.
Finally, one issue we have to address as a community is who we should let out on bail and who should be put behind bars. I would urge our governments to look at work done in the US, and in particular New Jersey where they used big data to predict who was likely to re-offend and who was not. This work resulted in lowering the number of people in prison AND reduced the crime rate. The use of big data correctly analysed was provided to judges and magistrates and armed with this knowledge significant changes for the better were achieved.
Here is the sad story as reported in the professional way that the Age is rightly renounced for. The journalist is Tammy Mills.
Rick and Sandra Zipsin were used to hosting drifters on their cattle farm on the edge of the Victorian high country.
So it wasn’t unusual when Gino and Mark Stocco came looking for work at the Zipsins’ farm in Glenburn , 30 minutes south of Yea, in the wake of the 2009 Black Saturday fires .
‘‘ We had a lot of fencing to do,’’ Rick said. ‘‘ Looking back now, they probably targeted this area because they knew people needed a hand.’’
The father and son were nomads, they moved from farm to farm across three eastern states and their work couldn’t be faulted.
‘‘ You couldn’t pick anything on them; their work was neat,’’ Rick said. Little did Sandra and Rick know then, but the Stoccos were also developing a nasty habit of turning on their employers at the slightest hint they weren’t wanted.
Gino Stocco, 59, and Mark, 36 had been on the run from the law for eight years when they exploded into the public’s consciousness.
They had been wanted for criminal damages on farms in Queensland, NSW and Victoria when they shot at a police car in Wagga Wagga, in southern NSW, and sparked a 10-day manhunt in October last year.
While they await sentencing in NSW after pleading guilty to the murder of a caretaker and a string of offences, Victorian detectives recently interviewed the pair for ramming a police car at Saint James and the fiery aftermath of their work for the Zipsins.
After the Stoccos’ first stint at the Glenburn farm in 2009, they dropped in unannounced year after year. One day the Zipsins asked to be left alone. ‘‘ We said for them to give us a break,’’ Rick said.
‘‘ I said you can come back, but maybe give us a year’s time.
‘‘ We didn’t know they were that bad then.’’
The Zipsins had no insurance on their sheds when the Stoccos did come back; the fire levy had been introduced and rates were through the roof.
‘‘ We thought we’d cancel the sheds and machinery off the insurance policy for one year and reinsure when the rates return to normal,’’ Rick said.
That’s when the attacks happened . Two fires three months apart burnt down three sheds and destroyed crucial machinery, causing almost one million dollars in damage.
The police investigation at the time was fruitless and it wasn’t until Queensland farmer Doug Redding, also an alleged victim, handed out his own ‘‘ wanted’ ’ posters that the Zipsins thought it could have been the Stoccos.
The three state police forces, according to one interstate officer , were not talking to each other.
To the individual officers on the ground, the criminal damage and arson left behind were isolated crimes that didn’t amount to much.
The Stoccos’ off-the-grid lifestyle – no phones, no credit cards, no nothing – didn’t help police trying to track them. And then Wagga happened.
‘‘ We didn’t know they were that bad,’’ Rick said.
‘‘ The bit that scared us was when they were down here in Victoria on their chase and everyone – all the coppers – were up in Yea and we were out here on our own.’’
The Zipsins welcomed the action from Victoria Police, but said it was too late to recover the losses on their farms. Victims of crime compensation is also out of the question as property crime is not covered by it.
The Zipsins, who have two children in primary school, remain crippled financially and psychologically.
They have sold their cattle, leased their farm out and haven’t been able to replace their machinery or sheds, which are still burnt-out shells.
‘‘ We built it all up and it’s all gone,’’ Rick said. ‘‘ It was the Stoccos all along for no good reason at all.’’
It is expected the Stoccos will be extradited to face Queensland and Victorian charges upon the completion of their NSW sentence.
A fundraising page has been set up to help the Zipsins rebuild their farm. To donate, see gofundme.com/ 2ay8e8aw.
Copyright © 2016 The Age
Mel’s Dinner suffered a major loss and while the claim is not yet settled the Insured sent this email through to the lead adjuster who is helping them through the ordeal. The important thing for me are that the client feels supported in their hour of need while at the same time providing their entitlement, nothing more, nothing less , in a timely manner keeping them fully informed along the way.
While the email was addressed to Des Reaby one of our senior claims team, Des is the first to acknowledge that Elle Cody and Nicola Crouch, also from the LMI Melbourne Claims Division have both been fabulous, working closely as a team to achieve a good result for all stakeholders.
Well done team. Getting an email like this from a satisfied client is a nice way for me to end the week. Melinda, I am sure Des, Elle and Nicola will continue to work with you to bring the claim to finality as soon as possible.
With all the stress and grief that followed after the loss of our business, I just wanted to let you know that you guys have been more than just loss adjusters, you have kept me calm and level headed and I want to thank you before I forget. It’s important to know that people appreciate when you do your job well and go above and beyond dealing with people during an emotional roller coaster.
Earlier this week I attended the NIBA (“National Insurance Broker Association”) Convention in Melbourne and found many of the sessions very informative.
One that I found was very well done was on Terrorism. My congratulations and thanks to the co-presenters of the session, Mike Pennell from the Australian Reinsurance Pool Corporation (“ARPC”) and Stella Pruscino from Willis Tower Watson. (Named in the order they presented.) Well done to both of you.
The topic of terrorism insurance is a very complex area and no one blog article could possibly do it justice but I do want to cover off on a couple of points for the benefit of readers.
Mr Pernell reminded the audience that the Pool does not provide coverage for motor vehicles. They are not regarded as eligible property under the relevant legislation.
What happens with property that is regarded as eligible property, once an Act of Terrorism is declared by the Government, then any terrorism exclusion in a policy of insurance is made void, the insurer pays the claim and if they have reinsured back through the ARPC they can recover their losses net of any retention.
The key points I want to remind Insured’s is that if you are not insured then you cannot claim from the Pool. If the policy has an exclusion for the loss or damage and or disruption in addition to the terrorism exclusion then again there is no cover.
Turning back to motor insurance a lot of policies do not provide coverage and so if there was to be a terrorist attack and vehicles were damaged there would be no avenue to claim. Other policies do however provide coverage. All policies have exclusions for nuclear or biological events as well. The question I ask myself is why is the exclusion there. Surely as an industry, we can deal with a terrorist attack if motor vehicles were damaged. I cannot picture a loss, other than in the event of a nuclear device or biological event (heaven forbid either happens anywhere in the world let alone Australia) that our industry could not cope with. We handle hail storms with no problem and surely the accumulation risk here is much greater than with a terrorist attack even if they were to blow up the biggest car park in the country. I feel this should be looked at as we are not fulfilling our primary role as an industry by not doing so and causing a lot of brand damage should an event occur.
One point that was cleared up for me was how the Pool would treat a September 11, style event where say it was orchestrated that simultaneous events took place in two Australian cities. While we could never be sure we would not have the long, drawn out and expensive court cases that followed the Twin Towers loss as to whether it was one event or two, it was explained that the coverage provided by the Pool is a Limit any one Period in the aggregate. Secondly, if it was not deemed to be a complete coincidence and the attacks were indeed a coordinated event then it would be regarded as one event.
I would leave you with one other point I was reminded of. If an Australian based Insured’s supply chain was effected by an terrorist attack overseas and despite the fact they had paid the Terrorism Levy now required with Australian policies, and they had overseas suppliers and customers cover in place, the terrorism exclusion would still apply for the terrorist attack has to occur in Australia for the Pool to be activated.
As I said at the start of this post, terrorism is a very real risk to the world and while stand alone coverage is available it is quite a complex area in its own right. If you have a client with an exposure that needs coverage, it would be prudent to get expert advice from someone skilled in this space like Stella who has a wealth of experience in this area.