ISR Question on physical damage trigger for interruption claim

Hi Allan,

For your interest, we have just placed an ISR [Industrial Special Risks] MKIV [Mark IV} Modified co-insured risk, part in Australia and part in London.

The risk does not have any Section 2 cover for Diseases, Murder, Suicide, etc. and also contains a Communicable Disease Exclusion clause.

That aside, London have modified the schedule of cover as follows: Section 2 – Consequential Loss Financial loss resulting from interruption or interference to the business by any cause not excepted by the policy and as a result of direct physical loss or damage.

This is not negotiable. Given the exclusions to the cover, do you foresee any other problems or potential gaps in cover arising from adding in the words “and as a result of direct physical loss or damage”?

Regards,

Karl [surname and email provided]

Hi Karl,

What you need to check is all the extensions of coverage that you have on the program that do not, under normal circumstances, rely on there being any damage present.

One that immediately comes to mind is murder or suicide, where under the policy these are deemed to be damage and, therefore, would trigger a claim as a result of disruption to the organisation. I say this as while some of the claims I have been involved in, where this has been the trigger, resulted in extensive damage. Others, have no evidence of damage at all, or the damage is remedied relatively quickly.

I would need a copy of the policy and schedule to identify all normal covers that may be affected.

What you are seeing is a complete overreaction to the current COVID-19 pandemic, where the underwriter has completely forgotten their place in society to protect their clients and the economy. Yes, some events are too big for an individual insurer to take on, but events that in countries like Australia, New Zealand and the United Kingdom, where we have low rates of murder and the disruption is confined to only one or two premises, then surely this can be priced into the product. Even a disease that affects a single building, such as Legionaries disease, that as an industry we have covered for decades without the sky falling in, should remain insurable.

We need to go back to genuine underwriting and not to ‘computer says no’.

Hopefully, this is enough information for you to carry out an audit of the program and see what other protections may be lost with this exclusion.