Business Interruption Issues Series – Part 3 – Time Excesses – Part B
Today, we continue our discussion on time deductibles. As I did yesterday, I draw on a case study to explain an issue.
This case study involves another large manufacturer. In this case, the wordings for the time deductible is contained within the Public Utility clause provided that cover does not commence until “24 hours after cessation of supply”.
To avoid major damage to the insured plant at a large production facility, the gas supplier allowed the Insured to implement a staged shutdown of the gas supply over the site, which took 11 hours. In other words, it took 11 hours from when gas supply was cut to the first machine, until it was cut to the last machine. Does this mean that the Insured in fact suffers a 35-hour time deductible? That is, 24 hours from the cessation of supply, plus the 11 hours of disruption they suffered during the phased shutdown. The wording of the deductible did not match the intention of either the insurer or the Insured.
In this case, using the Departmental Clause, it was possible to identify the loss by machine, and the claim was settled by applying the 24-hour time deductible on a machine-by-machine basis. A much more difficult adjustment and negotiation would have been required to achieve the agreed intention of the time deductible had the method of claim calculation used not been possible.