Fire Claims > Case Study-II

In July 2005, due to the floods in Mumbai, a reputed Multinational Shoes manufacturing companies various showrooms and depots were affected. They have incurred a total loss of around 15 Crores.

Insurance Coverage

The insured had taken one Policy which mentions the value of stocks and furniture and fixture for each locations and the address of all locations was specifically mentioned in the policy. Subsequently they have made several endorsements to cover or delete some locations and after cross checking the locations physically, in insurance policy and the agreements we have disallowed the locations, which were not covered under the policy. But there was one location of Mumbai, Bhiwandi Depot, which was changed from present godown location to new godown location in the same compound, so based on this fact the insured had intimated the insurers and they had also written that they were in the process of shifting. The insurers made an endorsement to such effect. So the loss occurred in both the godowns, so it is the duty of the surveyor to present such facts in the report and give alternative at their discretion may or may not allow the loss due to two reasons:

• They were in process of shifting
• The loss occurred in both godowns

Physical Inventory

During the course of our survey, the insured had segregated the stocks according to their condition (i.e. safe/damaged) and we conducted the complete inventory of safe and damaged stocks (model wise) and also noted the MRP from all location. Around 40 days were taken for completing this procedure. This physical inventory ultimately was compared with stock records and it become the basis of loss assessment.

Valuation of Stocks

We conducted the complete inventory of total stock, (safe & damaged) with the MRP/WSP rates for each of the affected articles (location wise) on our further verification of documents provided by the insured, we noticed the cost involves 70% of MRP (Maximum Retail Price) and 90% of WSP (Whole Sale Price). Accordingly, while making calculations, we have also taken into account the WSP & the MRP

• WSP – WSP is the rate taken into account by the Whole Sale Depots
• MRP – MRP is the rate taken into account by the retail shops and RDC.

We have taken the above both said facts for our calculation of loss as well as the value at risk.

Under Insurance

The insured had taken one policy to cover all the show rooms and depots all over India. And hence we have computed the value at risk as well as the loss assessment location wise.

Disposal of Salvage

The salvage was disposed off through tendering process. The insured had given an advertisement in three national daily news paper and two local dailies and called for bids with 10% of EMI. Thereafter the sealed bids were opened in presence of Surveyor, insured and the representative of underwriters and all other concerned and the bid was given to the highest bidder and through this process the maximum salvage value was realised. Typical problem was faced when cartel was formed by the bidders, but could only solves by re-bidding process.

Dead Stock Factor

Surveyor initially proposed 5% dead stock factor, but ultimately deducted the dead stock factor @2.5% based on the actual data made available by the insured from their system.