Legal Issues
BI claims triggered by a valid claim under
the underlying property damage policy
Basis of BI:
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US approach – loss of business income
- UK approach – reduction in turnover
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Every major energy BI claim will, at some
stage, require lawyers’ input. In our experience this is a natural
result of each contract of insurance being unique. Policy terms go
through a natural evolution, without an acceptable standard they tend to evolve
through cut and paste. Disputes between the assured and
underwriters in our experience always turn upon the proper interpretation of
the policy terms. Unfortunately, we have rarely found that lawyers had
been involved in the drafting of such policies. Consequently we often assist in
a post mortem of a contractual tragedy in an effort to discover what the
parties intended. However under English law this practice is restricted
to distilling the intention from the words used in the policy rather than
seeking external evidence of intent.
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Oil company speciality policies:
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Delayed start up policies
- the need to define “start up”
- critical path
- early loss events – problems in
tracking consequent delay
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Actual loss sustained basis
- determination of lost production
- barrelage (crude) cubic meterage (gas) lost
- interruption to the assured planned production volume
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Perils excluded
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“This policy does not insure ...the
costs necessary to replace, repair or rectify the design, plan, specification,
materials or workmanship."
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Extra expense
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“ The term extra
expense whenever used in this policy is defined as the excess (if any)
of the total cost incurred during the period of restoration chargeable to the
operation on the insured’s business over and above the total cost that would
normally have been incurred to conduct such business during the same period had
no damage occurred…”
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All approaches suffer from a failure
to properly and accurately define the significant policy terms. |
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Bi Indemnity Periods
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Waiting Periods
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Scheduled Turnarounds
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The “Part”
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Public Authorities Clause
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Definition of Public Authority
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Regulatory Bodies
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Codes of Practice/Best Industry Practice
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Test, Commission and Hand-Over
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Corrosion Exclusions
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“This policy does not apply
to…any loss, damage, or expense caused by or resulting from inherent
defect, wear and tear or gradual deterioration, or from expansion or
contraction due to change of temperature, unless resulting in the collapse of
the property or a material part thereof, but not excluding resultant physical
loss or damage to the remaining property or to other property insured
hereunder…”
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c/f corrosion as cause and corrosion as a
symptom.
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