California wild fires

In what is the end of the Northern Hemisphere’s summer it is terrible to see the impact in areas of California, including the Napa Valley, as well as East of Los Angeles Metropolitan area, being affected by bush fires.

The full details of the catastrophe are still coming in, but the early reports indicate that over 1000 structures have burned with 1000’s more under threat. Reports so far put the death toll at 13.

The cause of this fires is that it has been the especially dry conditions, similar to what we have experienced for much of our winter here in Australia, a long with strong winds. Australia is heading for another hot summer, and it is a reminder to any of us who live in bush fire areas to carry out a risk management audit of their property and review their evacuation procedures.

PHOTO: Wildfires whipped by powerful winds have swept through northern California. (AP: Jeff Gritchen/The Orange County Register)

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Blocked sewage pipes – the curse of the baby wipes

Here as some wipes that clogged pipework and caused an overflow situation. You can see there is no sign of them breaking down.

Just one of the many brands of baby wipes on the market that may cause a problem if not disposed of correctly.

LMI Claims have seen a number of water damage claims arise due to blocked pipes. While tree roots used to be the most common cause, the cause now is often baby wipes.

Most are not biodegradable and therefore not suitable for flushing down the toilet.

We have even seen the ones that claim to be flush-able causing problems.

With an overflow from sewage it is not a simple mop up and move on, especially if carpets or other soft furnishings are involved.

Following the old adage that prevention is better than cure, I hope this short post stops this from occurring at your home or place of work.

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Actions of the sea – Cyclone Debbie continues her path of destruction

Photo/Martin Sykes found on: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11832871

I have posted recently about the issue of actions of the sea, high water, flood and erosions, and with Ex-cyclone Debbie now finishing her path, leaving a trail of destruction in her wake we readdress this issue.

We look at the damage that has occurred and again we face a similar issue to that in Australia, in New Zealand now, where a home has their pool hanging OVER the cliff’s edge due to the land falling away.

See: https://www.tvnz.co.nz/one-news/new-zealand/raw-drone-footage-shows-auckland-homes-infinity-pool-hanging-off-cliff-after-backyards-massive-slip

When any of us purchase, or rent for that matter, a property, we have to make sure that the asset does not suddenly turn into a massive liability. Some risks are insurable, others, if they occur to frequently such as flood in some places or if they are deemed inevitable such as erosion, they may well not be.

 

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Acts of God in Insurance

It amazes me how many times people have spoken of Act of God being both an insured or excluded peril under an insurance policy.

There was even a famous Billy Connolly with this as its theme. My nephew, Jeffery, one of the guys sending me a joke questioned me on it and I thought it was worth setting the record straight.

Despite having read thousands of policies of insurance and being involved in the drafting of 100’s more, I have never seen the words ‘Act of God’ appear in a policy as an insured, or excluded peril.

What it means in layman’s term is:

a completely unforeseeable event where there has been no human intervention

Things such as fire, lightening, earthquake, tornado, hurricane, cyclone, flood, landslip, and the like.

Under policies such as a comprehensive motor vehicle policy, all these perils are in fact, insured. Most property policies, such as your home and contents, business pack or ISR, the vast majority would be insured, although landslip, action by the sea, storm surge and flood may be excluded.

If you are in any doubt as to the cover afforded by the policy which you have in place, I recommend that you speak to your insurance broker.

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Drones attacked by birds

PILSEN CZECH REPUBLIC - FEBRUARY 18, 2016: Drone quadrocopter DjGary Everdell an old friend from my days at General Accident and now with Aon wrote knowing my interest in drone technology to warn me that some drones are being attacked by birds. Here is a link to the ABC article: http://www.abc.net.au/news/2016-11-17/wedge-tailed-eagles-bring-down-drones-in-goldfields/8033056

Simon Hooper from QBE Aviation, who is one of the pioneers of insurance for drones (more correctly unmanned flying vehicles [UAVs]), and the insurer we have entrusted with our insurance, explained that bird attacks are a common problem in spring. I think every cyclist or school child who still walks to school probably knows  this but you may not have thought about it if you are flying a drone.

It is a good reminder though to be careful this time of the year, particularly flying around parks and rural areas that your drone may get some unwelcome attention.

With our LMI Drone we have elected to self insure the hull as the cost is not great but we would not fly it without the protection of aviation liability coverage.

Two of our team completed their CASA training last week and I am just waiting for their certificates to come in the mail before I make a splash and officially congratulate them. Watch this space but also watch for eagles, magpies and other aggressive bird species.

Thanks Gary and Simon for your sharing your thoughts.

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Ebay joins the warning on imported products

ebay-cropped

Source: ebay.com

I have posted a couple of articles of late advising of the fines and lack of insurance cover for imported products that contain asbestos.

A Gold Coast broker has written in response as follows:

Further to this I thought it interesting that as of a week ago certain purchases on eBay – namely from china – come up with a warning that I am responsible for making sure that the item meets Australian standards, this included the purchase of a child’s mechanical money box.

Regards

Jemma [surname and email provided]

Image provided by reader Jemma

Image provided by reader Jemma

The warning does not mention asbestos but rather is a general warning which covers a multiple of possible issues.

I really doubt such a warning will do anything other than reduce the liability of ebay and that products that really should not be coming into Australia will continue to do so with consequences that may not manifest for years.

Let us assume someone imports a gift for a relative or friend and they become ill or are injured. A budding entrepreneur imports goods which cause injury. These sort of folk will not have liability coverage under their home or business policies nor will they have product recall. This is the risk to them, but want of the people who ultimately obtain the product which contains asbestos or some other failure. It really can become a case of Russian roulette as to whether or not they become ill or injured.

Urrr! The feeling I have when I have no workable answer!

Thanks Jemma for sharing your findings and taking the time to write.

 

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Blog reader question – Alarm systems

I received a question from a reader and would like to bring it to all your attention also:

Good Morning Allan, hope you are well.

I had a query and seek your help in this matter – with more & more recent roll out of NBN in Commercial & Industrial areas, we have had a couple of clients complain that switching over to NBN from the old ADSL lines renders their existing alarm monitoring system useless unless they spend thousands of dollars to upgrade their entire alarm system.

This means, many small businesses may not have any alarm system in place and I believe this may further impact the crime rate and premium increases by the Insurers and perhaps increased rates depending on the products the clients deal in and the location.

I am personally having this issue with our residential alarm, system at the moment, if I switch to NBN, my monitoring will drop out. What are your thoughts on this and have you come across any such examples?

Kind Regards

Sarat [surname and email provided]

CCTV Home camera security operating at house. ** Note: Visible grain at 100%, best at smaller sizes

What you have raised is of concern Sarat. I am sure it is an unintended consequence of the government trying to keep Australia competitive and allowing all of us to benefit from fast internet.

From an insurance perspective, many commercial policies have what is known as an ‘Alarm Warranty’ which means that the coverage for burglary or theft normally provided by that section of the policy is voided if any alarm fitted is not maintained / not operational. In such circumstances it would be better to take the alarm out rather than have the useless one there.

Having said this, that may create a non-disclosure issue if you disclosed or answered a question to say you had a (working) back to base alarm. This same alteration of the risk issue would arise with the alarm no longer working as it should. It also defeats the whole reason why anyone installs an alarm in the first place. That is a risk management measure to reduce the likelihood of a robbery and minimize the loss if they are broken into through an early response.

A few things come to mind. I just upgraded the alarm in my home and the cost was much lower this time around than previously and the system much better. Perhaps shop around. Having said this, security is a bit like insurance. You often get what you pay for. The systems are not all the same and you want both to work properly when you call upon it. Interestingly, my new system connects via the internet and not the phone line.

This is not my area of expertise but if this was my property I would be doing my own research and not just relying on my existing alarm company who may just be trying to boost sales of new equipment. Perhaps one of my readers may have such a solution. They are a diverse and highly intelligent group. The bottom line is, get it working or replace it as the crime rate is increasing in many parts of Australia and my motto is always hope for the best but plan and insure for the worst. I am sorry I did not have a simple inexpensive answer straight up but hope this helps in some way.

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Change in Drone Laws in Australia

droneThe Civil Aviation Safety Authority (CASA) have announced Amendments to Part 101 to commence on 29 September 2016. CASA will be reducing the entry requirements for people wanting to fly a very small (under 2kg) remotely piloted aircraft (RPA) commercially.

The change entails that operators of very small (under 2kg) drones will not require an operator’s certificate. The operators certificate from September 29 will be called an RPA operator’s certificate (ReOC), or a remote pilot licence (RPL).

 

The change comes with some new restrictions surrounding the operation of very small drones, including:

  1. You must notify CASA five business days before flying

  2. Operate within the standard operation conditions

  • You must not operate your RPA in a way that creates a hazard to another aircraft, another person or property.
  • You must only fly during the day and keep your RPA within visual line-of sight.
    • This means being able to see the aircraft with your own eyes (rather than through first-person-view (FPV)) at all times.
  • You must not fly your RPA higher than 120 metres (400ft) AGL.
  • You must keep your RPA at least 30 metres away from other people.
  • You must keep your RPA at least 5.5km away from controlled aerodromes.
  • You must not fly your RPA over any area where, in the event of a loss of control or failure, you create an unreasonable hazard to the safety of people and property on the ground.
  • You must not fly your RPA over or near an area affecting public safety or where emergency operations are underway (without prior approval).
    • This could include situations such as a car crash, police operations, a fire and associated firefighting efforts, and search and rescue.
  • You can only fly one RPA at a time.

The above operating conditions are a broad reflection of Civil Aviation Safety Regulations Part 101 and do not encompass all the regulations you must follow.

Please also remember, insurance is available for the use of drones both privately and commercially and could be an important cover for you.

For more information surrounding these law changes and the regulations on drone flying, please visit the CASA website.

For LMI we will still be having our pilots undertake the course and licensing for flying for safety. Two members of staff will be completing the required training in November.

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12 months Indemnity Period for a property owner simply doesn’t cut it

Insurance written on Golden Keyring.I read this morning that the un-occupancy rate in Perth and other mining towns around Australia are significantly lower than they were just a few years ago.

For any client who has a good tenant in their premises, perhaps on a lease that had been signed up at the peak of the mining boom, should more than ever be considering the Indemnity Period that they have on their loss of rent/gross rentals cover.

With any significant loss, it is going to take more than 12 months to get council approvals, trades in place and the reinstatement completed. If the tenant abandons the lease, the length of time it will take to get in a new tenant, albeit at a lower rental will need to be considered.

Another consideration would be the level Additional Increase in Cost of Working. It may be prudent to pay trades over time to get the building reinstated quicker and there may be a necessity to have some sort of rent inducement, such as a rent free period, to attract a new tenant within in the indemnity period.

The take away point from this article is that while 12 months may be a traditional standard for Indemnity Periods, it is in my experience not adequate to fully protect an insured in the event of a major loss, bearing in mind that I have not even raised the issue of disaster situations, and each risk should be considered on a case by case merit using my personal adage of ‘hoping for the best, but planning and insuring for the worst’.

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What does the definition of Indemnity mean when it comes to buildings?

Structural Building DamageI read with interest the latest Insurance update from DLA Piper New Zealand. Crossley Gates and his team provide a very useful service to the industry with these updates. The interest to me on this matter was that the update suggests that in New Zealand it has been common practice for an Indemnity Value on a building to be set on the reduction of the market value before and after the date of the damage. 

This is not the common practice in Australia in my experience and the case of Brescia Furniture Pty Ltd v. QBE (Australia) Ltd [2007] NSWSC confirmed the position that where the property is not for sale, the true measure of indemnity is the value to the insured which is the replacement value of the building less an allowance for its age and condition. The position alters when the building was for sale at the time of the damage. In such a case the true measure of indemnity, which as we know is to put the insured back in the same position as nearest money will allow to the position they would have enjoyed but for the loss is the difference between the pre and post loss sale value. This can be complicated where there is a devaluation or increase in value of the land. For example the land value in a beautiful forested area may drop considerably after say a bush fire, while properties with a beautiful river view may again drop immediately following a serious flooding event. 

The third measure, which I’ve only had to use on rare occasions is the rentable value of the property. This is the measure of indemnity when, say a building is marked for demolition and the true measure of the value of the building is the net rentable income after allowances for agents fees, repairs and maintenance and the like, between the date of the damage and when the building was expected to be demolished.

I explore this in my book ‘Manning’s Six Principles of General Insurance – A Comprehensive Guide to Utmost Good Faith, Indemnity, Subrogation, Contribution, Insurable Interest & Proximate Cause’. To learn more about Manning’s Six Principles of General Insurance click here.

Yellow

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