The same question popped up twice today on Additional Increase in Cost of Working
I am taking part as a speaker in an insurance industry conference being hosted by TIO in Darwin. Over half the personnel engaged in general insurance are attending which is a great result and a testament to the organisers.
At the conference I was asked a question on Additional Increase in Cost of Working and last night when I got back to my apartment I found I had received the same question from a long term reader in Singapore. I reproduce the written question as follows:
Trust this email finds you well.
Could I trouble you with a query on a Business Interruption issue involving Increase in Cost of Working (“ICOW”). If for example, the sum insured for an ICOW cover has been exhausted (e.g., the ICOW was inadequately insured), can the spillover expenses be considered under an Additional Increase in Cost of Working (“AICOW”)?
We do not as yet have the policy wording from the cedent and the query is of a general nature. Many thanks in anticipation.
Joseph [surname and email provided]
My response to the question from both individuals was of course the same. I reproduce my answer to Joseph below.
It is difficult to answer your question without reviewing the actual wording but in principle the answer is yes. Under the wordings I am familiar with, the wording of Additional Increase in Cost of Working reads:
The insurance under this item is limited to increase in cost of working (not otherwise recoverable hereunder) necessarily and reasonably incurred during the Indemnity Period in consequence of the Damage for the purpose of avoiding or diminishing reduction in Turnover and/or resuming and/or maintaining normal business operations and/or services.”
As long as the expense has not already been paid as an increase in cost of working then any unclaimed portion, including that portion of an expense not paid due to under insurance is claimable under Additional Increase in Cost of Working.
I think the easiest way to explain this is to think what would happen to the expense if the Insured had insured Additional Increase in Cost of Working only, with no cover taken out and therefore premium paid for Loss of Gross Profit through a) a reduction in turnover or b) an increase in cost of working.
If the answer to this question is that the expense would have been paid under the stand alone Additional Increase in Cost of Working cover then the Insured is entitled to claim the expense subject to the Sub-Limit for Additional Increase in Cost of Working not being exhausted and b) no portion of the additional expense to the business not being met already as a valid increase in cost of working claim.
Naturally the expense claimed has to be a true increase cost of working to the business and not just a reduced margin or a standard business expense normally paid out of sales.
Hope this helps.