Blog Question: Machine damage during repair – application of exclusion and clauses
I would like to have your view in respect of application of exclusion and clauses in property insurance.
The policy has the following relevant exclusion and extension clauses:
Exclusion (1) :
The Insurers shall not be liable for loss destruction of or damage to property being worked upon and actually arising from the process or manufacture testing repairing cleaning restoring alteration renovation or servicing
Clause (1) :
ALTERATIONS AND REPAIR CLAUSE
Notwithstanding anything contained in the printed conditions of the policy to the contrary, it is noted and agreed that this Insurance shall not be prejudiced in the event of any alterations being made to the property insured whereby the risk of damage is increased, provided that notice of such alterations be given to the insurer within sixty (60) days of the commencement of such alterations and additional premium paid, if required from the date of such alterations.
Clause (2) :
MINOR ALTERATIONS AND REPAIR CLAUSE
Minor alterations, additions and repairs to building, plant fixtures and fittings, and machinery (exclusive of any Sprinkler Installations) and minor works in progress are allowed and the insurance by this Policy shall not be prejudiced by this.
Minor alterations, additions and repairs costs shall in no case exceed 1% of Total Sum Insured
Consider a machine was damage during repair exercise conducted by a contractor/repairer. The cause of damage attributable to the repair work itself.
In my opinion, without extension clauses, exclusion (1) applies, i.e. the machine is not covered.
However, would the policy respond differently with insertion of clauses, especially clause (2)?
– assumed the repair cost is below 1% of TSI
– This clause say “this policy shall not be prejudiced …”, what is the interpretation / application of “shall not be prejudiced” ?
Many thanks in advance,
I agree with you on this. On the words you have given it means that as long as the amount of the repair is minimal then the insured does not have to report it and the exclusion will not apply.
One of the reasons an exclusion appears is that the insurer wants more information before they determine if they are prepared to underwrite the risk. Here they do not want to be bothered with every time a machine has a small repair and are prepared to accept that risk.
I hope that makes sense.