Glossary
Property Damage
Please use the alphabetical links below to quickly jump to a glossary entry.
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A
All Other Contents Clause / Other Contents Clause
This clause defines the term “All Other Contents” (under the item headed “Machinery and All Other Contents”) to include inter alia
- documents, manuscripts, business books (for their value as stationery and the cost of clerical labour to write them up, not for the value of the information contained in them).
- patterns, models, moulds, plans and designs (i.e. the cost of labour and materials expended to recreate them).
- computer systems records (again for the cost of the media and the cost of clerical labour/ computer time to reproduce the records, not for the value of the information contained in them). Subject to a limit.
- personal property of employees, directors and visitors if they are not otherwise insured (e.g. under the individual’s household insurance). Subject to a limit per person.
Alteration Clause
This clause states that Insurers can avoid the policy if there is a material alteration to the risk (after commencement of the policy) which either increases the risk of damage or by which the Insured’s interest in the property ceases, unless such alteration has previously been agreed with Insurers in writing.
Architects and Surveyors Fees / Professional Fees Memorandum
Architects, surveyors, consulting engineers, legal and certain other fees necessarily incurred in the reinstatement of the property insured are included.
Automatic Acquisitions Cover
The policy will automatically extend to include the assets of newly purchased companies up to the specified limit and subject to full underwriting information being provided within a specified period of time.
Automatic Reinstatement of Loss
Unless the Insurance Company (or the Insured) advises in writing to the contrary, the sums under the policy will not be reduced by the amount of any loss, provided the Insured pays the additional premium required for the sums insured to be reinstated. (The additional premium is sometimes waived)
Average Conditions
Most Sums Insured are subject to Average. In this event, settlement of any claim will be based on that proportion of the loss that the Sum Insured bears to:-
- the reinstatement cost at the time this takes place if cover is on a Reinstatement basis or
- the reinstatement cost at renewal date if cover is on a Day One Reinstatement Basis or
- the actual value of the insured property at the time of the loss, if cover is on an Indemnity Basis
Thus, to avoid being penalised it is essential that Sums Insured are maintained at an adequate level.
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B
Branded Stock (also known as the Labels Clause)
In the event of damage to stock and materials in trade, any salvage of branded goods shall not be disposed of without the consent of the Insured. In the event of a sale not being agreed, the value shall be taken into consideration on settlement of the loss.
C
Capital Additions Clause
Following any newly purchased buildings and/or contents or improvements or extensions to existing buildings, automatic cover is in place up to the limits stated. This cover is provisional upon the insured advising Insurers of the increased sums as soon as possible.
Clearing of Drains
The policy extends to cover expenses necessarily and reasonably incurred in clearing, cleaning or repairing of drains blocked or damaged as a result of one of the perils specified under the policy. (A warranty regarding regular clearing of drains is usually imposed.)
Contingent Cover for Leased Out Buildings
This extension provides contingent cover on buildings leased out for which the responsibility to insure rests with the tenants.
Contingent Cover for Leased/Rented Premises (Difference in Conditions/Difference on Limits)
The policy extends to include loss of, or damage to, premises (including landlords fixtures and fittings thereof) leased by, or rented to, the Insured, in excess of the cover provided by the Landlord’s policy, provided loss of or damage arises as a result of one of the perils specified under this policy.
Contingent Landscape Clause
The insurance extends to include costs and expenses incurred in making good damage to landscaped gardens and grounds as a result of Insured damage to the property. Often restricted to damage caused by the fire brigade.
Contract Price Clause
This clause applies only in respect of goods sold but not delivered, for which the insured is responsible. If under the conditions of sale the sale contract can be cancelled in the event of loss, destruction or damage to said goods, the policy will pay the contract price of the goods.
Customers Goods Clause
Where the Insured has intimated to their customers that they will accept responsibility for loss of or damage to customers’ goods (whether or not the goods are manufactured by the Insured), the policy will provide cover for them under the Stock-in-Trade item unless they are specifically insured elsewhere.
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D
Day One Average Memorandum / Day One Reinstatement
The “Day One” Basis is a form of Reinstatement Cover used as a method of countering the effects of inflation on sums insured.
The Sum Insured is shown as being in two parts. It is your responsibility to provide initial values representing the reinstatement as new cost of buildings, machinery / plant and contents insured on the first day of the insurance policy(i.e. on ‘day one’). This figure is known as the “Base”/“Day One” value or more usually the “Declared Value”. It is normally expressed in brackets.
This “Declared Value” figure is uplifted by an agreed percentage (inflation provision) to yield a Sum Insured designed to be adequate to meet the reinstatement costs which could be incurred years after the damage occurred. The uplift represents inflation from the commencement of the insurance period to the date of reinstatement following a loss, which may be some time after the end of the policy period. (e.g. a 10% uplift). The declared value plus this inflation provision make up the Sum Insured.
The policy may be adjustable (on the declared figure) or non-adjustable.
Debris Removal
The policy will pay the costs of removing debris, clearing of drains and sewers, dismantling and/or demolishing or propping up damaged or destroyed property.
The clause can also include removal of undamaged portions of the property.
Debris Removal can also apply to stock
Designation
For the purpose of determining which item property is insured under, cover will be provided in line with the designation under which the property has been entered in the Insureds’ books of account.
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E
Electrical Clause
The policy will not cover damage to electrical plant or apparatus caused by self-ignition. The exclusion only applies, however, to the actual part of the apparatus in which self ignition occurs.
F
Fire Extinguisher Expenses
Cost of foam etc. necessarily incurred to protect premises against fire in so far as the costs are not recoverable.
Foundations
For the purposes of Average the Sums Insured for buildings, at the Insured’s discretion, shall not apply to the foundations. Any amount remaining may be applied to the foundations and Average applied separately.
I
Inadvertent Failure to Insure
The policy extends to include property up to the specified limit which has been inadvertently omitted, provided full details are provided as soon as the error has been discovered and the payment of the premium due from the date at which insurance should have commenced.
Indemnity
Where insurance polices are “Contracts of Indemnity”, the intention is to put the Insured in the same financial position after the loss as they were immediately prior to the loss with no gain or betterment. i.e. had no loss occurred.
Therefore, when considering the insurance of material goods, such as buildings, plant and machinery, Sums Insured on an Indemnity Basis should reflect the cost of replacing the insured property with property in a similar condition to that lost to damaged. It is not sufficient to use the “written down” or “book value” of property as these are, quite often, based on the original purchase price and not today’s replacement price.
Claims settlement may take into account deductions for depreciation or wear and tear, having regard to the age and conditions of the damaged property prior to the loss/ damage. The contract of insurance is usually one for monetary payment although Insurers may, at their option, carry out the repair or replacement of the lost or damaged items on the Insured’s behalf, subject to the limitation of the Sum Insured.
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L
Loss of Metered Water
The policy extends to cover loss of metered water provided the loss arises as a result of an insured peril. Usually subject to a monetary inner limit.
M
Metal Workers
The insurance extends to cover property insured whilst at :-
- any machinery makers, engineers, founders or other metal workers premises
- any customers and/or agents premises
- any subcontractors premises
- transit by road ,rail or inland waterway
Any where in the United Kingdom and subject to the limit stated.
Motor Vehicles
The policy extends to include motor vehicles whilst at the Insured’s premises which are damaged by an insured peril. The cover provided by this extension is the difference between the Insured’s motor policy (market value basis) and the property damage policy (reinstatement basis). Certain perils may be excluded.
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N
Non Invalidation/ Lessees Clause
The insurance will not be invalidated by any change of occupancy (or increase in risk) which takes place in the premises without the knowledge of the Insured. The insured must advise Insurers immediately they are aware of such change taking place and pay an additional premium if required.
O
Obsolete Buildings Clause
For the purposes of Average, the basis of valuation shall be :-
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the cost of purchasing a similar building plus allowance for removal of debris
or
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the cost of erecting a modern building providing comparable facilities plus an allowance for professional fees and removal of debris
Other Interests Clause / All Other Interests Clause
This clause makes provision for the names of interested parties to be noted on the policy automatically and declared in the event of a claim. This is to avoid a multitude of endorsements changing the interests noted on the policy.
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P
Protections Maintenance
As far as reasonably possible, all protections are to be kept in force and maintained and not altered or removed without consent of Insurers. They are to be in full use out of business hours or when the premises are left unattended. The clause sometimes specifies protections as fire extinguishers, alarms, sprinklers, fire break doors and shutters.
Public Authorities Memorandum
The policy will provide an indemnity for any additional costs of reinstating the property incurred because of the need to comply with Building or other Regulations.
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R
Reinstatement Basis of Cover / Reinstatement Memorandum
The policy will pay for replacement of destroyed property with new property; damaged property will be repaired to a condition as it was when new. (“New for Old”)
Sums Insured on a Reinstatement basis should therefore represent the cost of replacing the insured property as new, not at today’s cost but the anticipated cost at the time of Reinstatement, taking into account inflation and the time required / necessary to complete the Reinstatement. e.g. rebuilding time / lead time on replacing machinery. The sum insured should take into account the increased costs of reinstatement that will be caused by such delays.
Claims will be settled on the basis of the cost of replacing the lost or damaged property by similar property, equal to but not better or more extensive than when it was new, subject once again to the limitation of the Sum Insured. No deductions are made for wear and tear. Replacement property must be of a similar type to the damaged or lost property but not better nor more extensive than its condition when new.
However, the actual work of reinstatement must be carried out. If you decide not to replace or repair the lost or damaged property, the contract reverts to one of indemnity and a monetary settlement will be made with deductions for wear and tear.
Replacement Locks Clause
Following the loss of keys from the premises by theft as defined in the policy, Insurers will pay reasonable expenses incurred in replacing the locks. This is usually subject to a specified limit.
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S
Subrogation Waiver
In the event of a claim, Insurers agree to waive any rights, remedies or relief to which they would be entitled by subrogation against any parent company or subsidiary of the insured.
T
Temporary Removal
Includes cover for insured property temporarily removed to a third party premises (often specifically stated for the purposes of cleaning renovation or repair) within the UK . Subject to a limit - usually 10% of the sum insured.
Temporary Removal of Deeds and Documents
Theft Damage to Buildings
Theft of Buildings
Trace and Access
This extension provides cover for the costs necessarily incurred in locating the source of any escape of water or fuel, including subsequent repair to walls, floors or ceilings but excluding the repair to the pipe or installation from which the escape of water or fuel took place.
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U
Underground Services
Cover extends to include “resulting” damage to underground services (i.e. pipes, mains and cables) on the insured’s premises and for which they are responsible.
V
Vendors and Purchasers /Transfer of Interest / Contracting Purchasers Clause
During the sale of a premises the vendors/ purchasers interest is noted on the policy automatically.
W
Workmen Clause
Workmen are allowed to effect minor repairs alterations or extensions without prejudice to this insurance.
Y
Yards, Roads and Drains
Cover includes damage to yards, roadways, paths, drains and sewers etc.
72 Hour Clause
This clause allows for all damage resulting from storm or flood over a 72 hour period to be dealt with as one incident, therefore preventing insurers applying several excesses.
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