CLAIM FOR LOSS OF STOCK

CLAIM FOR LOSS OF STOCK
Fire insurance being a contract of indemnity, a claim can be lodged only for the actual amount of the loss, not exceeding the insured value. In dealing with problems requiring determination of the claim the following point must be noted:

a. Total Loss: If the goods are totally destroyed, the amount of claim is equal to the actual loss, provided the goods are fully insured. However, in case of under insurance(i.e. insurable value of stock insured is more than the sum insured),the amount of claim is restricted to the policy amount.

b. Partial Loss: If the goods are partially destroyed, the amount of claim is equal to the actual loss provided the goods are fully insured. However in case of under insurance,the amount of claim will depend upon the nature of insurance policy as follows:

I) Without Average clause:- Claim is equal to the lower of actual loss or the sum insured.

II) With Average Clause:- Amount of claim for loss of stock is proportionately reduced, considering the ratio of policy amount (i.e. insured amount) to the value of stock as on the date of fire (i.e insurable amount) as shown below:

Amount of claim = Loss of stock x sum insured /                                                 Insurable amount (Total Cost)

One should note that the average clause applies only where the insured value is less than the total cost and not when goods are fully insured.