For the experts, the Insurance Policy is crucial in order to be able to adjust a loss event. Therefore, when the Policy is “made to measure”, that is to say, when it is tailored to the risk it is intended to cover, the process of the loss adjustment is usually straight forward.
The problems arise when this is not the situation, especially in covers for SMEs, when often the Policy fails to cover the Insured’s basic risks or even the Sums Insured are not updated and results in underinsurance.
However in many cases, both in Policies that are tailored to the risk they were intended to cover as well as those that are not, added complications arise such as vagueness and poorly drafted wordings, not to say ambiguities in many of the Policy clauses, particularly in those to do with the exclusions.
It may exclude corrosion and erosion, but neglects to indicate that this refers to that corrosion and erosion that originates in a slow and gradual manner but not to that which arises accidentally and unexpectedly.
The same thing happens when the loss event is caused by a defective item. The Policy fails to clarify that the rest of the damage brought about to other parts of the machine or installation by this defective item could be afforded cover thereunder.
Again the same occurs with the Consequential Loss covers. Normally, regarding the time Deductibles, they do not specify just how the days indicated therein must be considered: Are they working days? Calendar days? The initial days after the occurrence? Are they to be allocated pro rata? This lack of definition causes, at least in Spain, many problems when it comes to adjusting a claim.
Neither do these LoP Policies normally specify what percentage of Gross Margin must be taken into account when calculating the indemnity: Is it that of the year the loss event occurred? That of the previous year? And if the loss event affects two accounting years, which one should be applied?
Likewise the Policies do not define who must be responsible for the extra expenses, since they do not indicate that these should be assumed pro rata to the benefits that may accrue to each party from the same.
Lastly, nor do they usually specify how the costs of recommissioning the damaged piece of equipment or installation must be treated once it has been repaired. Should this be done under the Material Damage cover or under the Consequential Loss cover?
In the opinion of VANTEVO CLAIMS ADVISORS, the drafting of the wording of the Policies is unsatisfactory and Insurers ought to improve the clarity and accuracy of the same, avoiding any vagueness and possible disputes that in many cases harm them.