Loss Assessment, Business Interruption and Claims
The claims section of IC-88 tests how engineering losses are investigated and how consequential losses are measured. The key is to establish the insured peril, the damaged property, the sum insured basis and whether a BI extension applies.
Core rules
- The surveyor establishes proximate cause, extent of damage, reinstatement cost, salvage and subrogation potential.
- Engineering claims are settled on the policy basis - often reinstatement - less deductibles, subject to sums insured and limits.
- Business interruption following MB/boiler loss covers loss of gross profit and increased cost of working during the indemnity period, after the waiting period.
- The BI sum insured is usually based on gross profit or annual profit plus fixed charges; underinsurance can reduce the claim.
- Excluded causes - wear, faulty design, maintenance failure, penalties - remain excluded even if a BI loss follows.
Worked example
An MB-insured compressor fails, stopping production for 10 days. The BI extension has a 7-day waiting period and a gross-profit rate of ₹2 lakh per day. The indemnifiable interruption is 3 days, so the gross-profit loss is ₹6 lakh, subject to the BI sum insured and any increased-cost adjustments. The MB deductible applies to the material damage claim.
Traps
Do not pay BI without the extension. Do not ignore the waiting period. Do not use turnover as gross profit. Do not allow a covered BI claim to resurrect an excluded MB cause. Do not forget average/underinsurance.