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9 - Indemnity (Measure of indemnity (Property insurance (Machinery and…

- - - - Cost of repair, or replacement if this isn't possible
        
        Always minus allowance for wear and tear
      - There may be no second-hand market and therefore insured recieives new item minus amount for betterment
      - Indemnity for written off vehicle will be market value not trade-in price
    - - Generally consist of raw materials, works in progress and finished stock
      - Indemnity for raw materials is replacement cost plus delivery cost
      - Indemnity for stock is raw materials plus labour
    - - Cost of repair or reconstruction minus amount for 'betterment'
      - Finding correct basis of indemnity can be more difficult if it doesn't make sense to reinstate building to how it was previously
      - Market value may be used as basisof sttlement if property was up for sale at time of loss (could be less than market value)
    - - Cost to replace stock at time of loss including transport and handling costs
      - Market price the most appropraite basis
    - - Indemnity for loss is value at date and place of loss
        
        Value may have increased or decreased
      - Cannot claim for loss of prospective profits unless specifically insured
      - Insured can't claim any amount for sentimental value
    - - Local market price
        
        Replacement cost is selling price and therefore insured may profit
        
        Gov. may set minimum price gaurantee which could form basis of indemnity
  - - - Difficult to establish what would constitute exact indemnity and therefore payment is calculated using formula set out in policy wording
  - - - Valued policies
      - Unvalued policies
        
        Basis of settlement will be 'insurable value'
        
        Value of the subject matter at the commencement of the risk
- - - - If property is defective, or there is unreasonable delay, insured can sue for breach of contract
    - - May choose to reinstate if they suspect but cannot prove dishonest intent behind the loss
    - - Fires Prevention (Metropolis) Act (1774)
        
        Insurer must use money to reinstate if...
        
        They suspect fraud or arson by insured
        
        Upon request of person(s) interested in buildings
        
        May be invoked by anyone other than insured who has legal or equitable interest in buildings
  - - - No obligation from insurer to restore property
        
        Will only however receive indemnity cover
- - - - Policy lapsed when cover used up unless insured pays additional premium
      - Not enforced where loss and AP are insignificant
    - - Insurer liable for successive losses even if sum insured exceeded
      - If ship needs repairing, then subsequently sinks, insured can claim for both
  - - - Automatic right to terminated cover can be modified by terms of policy
        
        Insurer may allow property to be substituted into policy
      - Express term in motor policy
    - - Insured will need to enact a new policy for replacement property and pay further premium
      - Insured could lose a whole year's premium depending on when loss takes place
        
        Specialist 'premium insurance' can be purchased to cover this
    - - Life
        
        Payment of sum insured will end contract
      - Property
        
        Payment of total loss end insurers liability
        
        Restored polcy will require fresh policy and fresh consideration
- - - - Insured will not receive full indemnity if sum insured or limit of indemnity is inadequate
      - Average clause
        
        Claim payment reduced proportionately
        
        FORMULA
        
        Only applies automatically as implied term in marine insurance
    - - Clause which provides that the insured must bear the first amount of any loss
      - Aggregate excess
        
        Insurer not liable to pay any claims until combined claims total exceeds certain amount
    - - There may be further limits within overall sum insured or limit of indemnity
        
        For particular types of loss or property
        
        Cover for certain valuables can be restricted to a % of the sum insured
    - - Insurer not liable for any loss which totals less than a specified amount but liable for whole loss if total exceeds this
    - - In liability insurance, insured cannot recover more than limit of indemnity
        
        Costs incurred may sometimes be payable over the limit
      - RTA (1988)
        
        Requires unlimited cover for TP bodily injury
      - Motor insurers will use market value at time of loss as sum insured
  - - - Indemnity basis of cover may not provide enough money for insured to restore their property after deduction for wear and tear
      - Insurer pays cost of rebuilding 'as new'
      - Cover still restricted to indemnity unless rebuilding work is commenced without unreasonable delay
    - - Often basis of cover for household contents policies
      - Insurer pays full replacement cost 'as new' without deduction for wear and tear
    - - Sum agreed at inception of policy will be paid out regardless of actual value of loss
      - Claim under value policy is 'liquidated amount'
        
        Agreed amount
      - Often used where property is unique or for which there is limited market
    - - Elcock vs Thompson (1949)
        
        Insured entitle to proportion of agreed value equivalent to degree of depreciation value
      - Insurer may specifically state that basis of settlement will be cost of repair
- - - - Subject matter damaged or insured deprived of possession of ship or goods but subject matter not destroyed
      - Repair could exceed value of ship or goods after doing so
      - Abandonment is automatic when total loss is paid
      - Insured must serve notice of abandonment if they wish to be paid CTL
    - - insurer claiming this is salvage and insured giving it up is abandonment
  - - - Will not pay full indemnity and therefore cannot keep whole of the salvage