In Delay in start up or business interruption insurance, what are the difference between time deductible and deductible in number?
What is the Difference between Time Deductible and Deductible in Number?
In Delay in Start-Up (DSU) or Business Interruption (BI) insurance, both the time deductible and deductible in number refer to the amount of time or monetary value that must elapse before the insurance coverage begins. However, there is a key difference between the two:
- Time Deductible: A time deductible refers to the waiting period before the coverage starts after the insured event occurs. For example, if a factory is damaged by a fire, the time deductible might be 30 days. This means that the insurance coverage would only kick in after 30 days have passed since the fire occurred. During this waiting period, the insured party is responsible for all costs and losses.
- Deductible in number: A deductible in number refers to a fixed monetary amount that the insured party must pay out of pocket before the insurance coverage starts. For example, if a factory is damaged by a fire and the deductible in number is $10,000, the insured party must pay the first $10,000 of the losses and damages, and the insurance coverage would only start after that amount has been paid.
In summary, the time deductible is a waiting period before the coverage starts, while the deductible in number is a fixed monetary amount that must be paid by the insured party before the insurance coverage starts.
Case study: Nifty Copper Mine v International Mining Industry Underwriters Ltd
The Nifty Copper Mine v International Mining Industry Underwriters Ltd case was a dispute over a deductible in an insurance policy related to property damage and business interruption losses at a copper mine in Western Australia.
The argument centered around the interpretation of the deductible clause in the insurance policy, which stated that the insurer would only be liable for losses exceeding a certain amount, referred to as the deductible or excess. The deductible was expressed as a percentage of the insured value of the property.
The insured party argued that the deductible should be applied only to the property damage losses and not to the business interruption losses, which were separately insured under the policy. The insurer, on the other hand, argued that the deductible should be applied to all losses, including both property damage and business interruption losses.
In the end, the court sided with the insurer, ruling that the deductible applied to all losses, including both property damage and business interruption losses. The court noted that the policy language was clear and unambiguous in this regard, and that the insured party had not provided any evidence of industry practice or other factors that would justify a different interpretation.
The case highlights the importance of carefully reviewing and understanding the terms and conditions of insurance policies, particularly with respect to deductibles and other limitations on coverage. It also illustrates the potential for disputes to arise when different parties have different interpretations of policy language and intent.
How was the deductible calculates at the end?
In the Nifty Copper Mine v International Mining Industry Underwriters Ltd case, the deductible for business interruption (BI) losses was expressed as a percentage of the insured value of the property. Specifically, the deductible clause in the policy stated that the insurer would only be liable for losses exceeding 1% of the insured value of the property.
The court did not need to calculate the amount of the deductible in monetary terms, as this was already specified in the policy as a percentage of the insured value of the property. Instead, the court needed to determine whether the deductible applied to all losses, including both property damage and business interruption losses, or only to property damage losses.
The court ultimately concluded that the deductible applied to all losses, including both property damage and business interruption losses. This meant that the insured party was responsible for paying the portion of the losses that fell below the deductible amount, regardless of whether they were due to property damage or business interruption.
It is worth noting that the calculation of deductibles can vary depending on the terms and conditions of the insurance policy. Some deductibles may be expressed as a fixed monetary amount, while others may be expressed as a percentage of the insured value of the property or some other metric. It is important to carefully review and understand the deductible clause in any insurance policy to ensure that you understand your obligations in the event of a loss.
What is the lesson learned?
The Nifty Copper Mine v International Mining Industry Underwriters Ltd case provides a number of lessons for businesses and individuals who purchase insurance policies:
- Read and understand the policy language: It is important to carefully review and understand the terms and conditions of insurance policies, including any limitations on coverage such as deductibles or exclusions.
- Seek professional advice if necessary: If you are unsure about the meaning of policy language or how it applies to your specific circumstances, seek advice from a qualified insurance professional or legal expert.
- Be aware of industry practices: Understanding industry practices and norms can help you to make more informed decisions about insurance coverage and negotiate more favorable terms with insurers.
- Consider the potential for disputes: Insurance disputes can be costly and time-consuming, so it is important to carefully consider the potential for such disputes when selecting insurance policies and negotiating terms.
- Maintain good records: In the event of a claim or dispute, it is important to maintain good records of all relevant communications, documents, and other evidence that may be needed to support your position.
