Over the next few weeks, I thought I would go over one of the additional benefits provided by the Industrial Special Risks (“ISR”) Policy. We start with the first of the additional benefits, architect, surveryor’s and similar fees.
The exact words of the Mark IV wording are:
“Subject to the liability of the Insurer(s) not being increased beyond the Limit(s) of Liability already stated herein, the Insurer(s) will also indemnify the Insured for:
(a) Architects’, surveyors’, consulting engineers’, legal and other fees and clerks’ of works salaries for estimates, plans, specifications, quantities, tenders and supervision necessarily incurred in reinstatement consequent upon damage to property hereby insured but not such costs, fees and salary for preparing any claim hereunder.”
While the “reinstatement and replacement” memorandum covers the cost of reinstating the damaged building, there is much more to building a commercial building that the cost of the materials and labour. This first additional benefit acknowledges that artictects and a number of engineers will, in all likelihood need to be involved. There are soil tests to be conducted, then engineers to design the foundations, the structural components of the building, the electrical and mechanical services including lifts, and air conditioning etc.
Further, the insured may require a project manager or the like. Again this additional benefit provides the insured with cover for this expense subject to the test for co-insurance and the Limit of Liability.
The reference to “and other fees” would by applying the ejusdem generis rule of document (or Statute for that matter) interpretation, and means only fees necessarily associated with the reinstatement of the Damage.
While the costs of architects, surveyors and consulting engineers are usually associated with buildings, consulting engineers in particular can be useful in the reinstatement of plant and machinery, and even stock in some cases. These additional costs are necessarily confined to the reinstatement of property and are consequent upon damage. It would appear not to include such costs involved in the removal of debris, temporary protection etc that would be covered in a later Additional Benefits which we will cover off in future postings.
Claim preparation costs under the policy are specifically excluded in this clause.
The last point I would make is that while the balance of the additional benefits are not included in the test for co-insurance, it is necessary that architects, surveyors and the fees that fall within this cover are included in the Declared Values and will certainly be included in any test post loss. I personally believe that it is unreasonable for an underwriter to include any part of the cover for under insurance and impose a Sub-Limit for the same benefit.
Simply put, the ejusdem generis rule means that where a word of general specification is preceded by a specification of particulars, all of which may fairly be regarded as being
comprised in the same genus, the word cannot be taken to include anything which does not belong to the genus indicated. For more information on the topic, I recommend Pearce D.C., 1981, Statutory Interpretation in Australia, 2nd Edition, Butterworths Pty Ltd, pp.49-54.