The difference between a condition and a warranty in Insurance

The definitions of a condition and a warranty are very specific in the context of insurance law. 
A warranty can be a condition but a condition may not be a warranty.
Generally, a condition is an essential part of a contract, and if breached, the party that has been deprived is permitted to claim damages and even terminate the contract because the breach has in effect repudiated the contract. On the other hand, a warranty would not be considered a vital part of the contract. In the event that one of the parties to the contract is found to be in breach of the contract, he or she is at liberty to make a claim in damages but this does not mean that the party who did not breach the contract could terminate the contract. The meaning of these terms is reversed in insurance law.
 
Warranties play a greater part in insurance law than conditions. A warranty is a term of insurance contract that if the insured has breached, the insurer is no longer held to be liable as of the date of the breach. So a breach of a warranty would invalidate the insurance claim.
Warranties include promises, warranties of opinion and promissory warranties. Warranties as promises relates to facts that the insured agree to do or not do. Warranties of opinion are given based on information that the insured believes to be true to the best of his or her knowledge and belief. A breach of this warranty would occur if the insured knowingly gave false information to the insurer. Promissory warranties are based on future promises or continuing promises from completed proposal forms or within the body of the insurance policy.
Some conditions can be warranties but warranties may not always be conditions. The nature of conditions is quite complicated in insurance law; and includes condition precedents, mere conditions, promises and conditions precedent. The heading ‘Conditions’ is prominent in most insurance policies. In most cases, this term does not relate to the statements of fact or the risk covered within the insurance policy. They could in fact be warranties, collateral promises or stipulations.

It is important to distinguish between warranties and conditions for many reasons. For example, a typical condition of an insurance policy is that the insured must provide the insurer will all pertinent information about himself or herself. If the insured has failed to do so, the insured is in breach of his or her policy but the insurer is likely not to make a claim if the insurance company acquired this information from another source. On the other hand, warranties must be more strictly complied with for the policy to be valid.
Broadly speaking, there are two types of collateral terms which are considered conditions: promises or obligations imposed on the insured in relation to the claims procedure which are not considered fundamental to the validity of the contract; and conditions conferring rights on the insurer, which emphasis or reiterate the rights of the general law.
Lord Saville in the case, Hussain v. Brown (1996) made a useful observation about defining conditions and warranties:-
 

“In my judgment…there is no special principle of insurance law requiring answers in proposal forms to be read, prima facie or otherwise, as importing promises to the future. Whether or not they do depends on ordinary rules of construction, namely consideration of the words of the parties have used in the light of the context in which they have used them and ( where the words admit of more meaning) selection of that meaning which seems most closely to correspond with the presumed intentions of the parties.”
Warranties and conditions in insurance law are subject to interpretation of the language used, and the intention of the parties. When there has been a breach of a condition or warranty, the onus of proof is on the insurer to demonstrate that the breach has occurred and who is at fault.
 

Special thanks to: Ms. Trudy O. Glasgow is a practising attorney at the law firm Gordon, Gordon & Co., (and has also taught law at University level in the UK)*. http://www.thevoiceslu.com/features/2010/march/13_03_10/The_difference.htm

Contingent Business Interruption: Getting All the Facts

Contingent Business Interruption: Getting All the Facts

Today’s risk manager looks to contingent business interruption (CBI) insurance to soften the financial impact of events outside the firm's control. There are four elements to handling a CBI claim: understand the impact of other business on your operations; have a business continuity plan; incorporate the correct policy wording and limits for your circumstances; identify all the potential areas of loss and document them effectively.

by Daniel T. Torpey
Ernst & Young, LLP

How much of your company’s operations rely on another entity? How disruptive would a long-term computer outage be to your company’s ability to maintain normal business operations? What if you lost a key source of raw material or component parts from a supplier? What if the financial markets were interrupted again or a transportation disruption occurred in the United States?
Today’s risk manager is faced with many of these questions and will often look to contingent business interruption (CBI) insurance to soften the financial impact of these events. CBI insurance, on its surface, may appear straightforward; however, the documentation and analysis needed to validate an insurance claim can be quite challenging. Relying solely on the concept of CBI insurance and not understanding what is needed to document and collect a claim could create a false sense of security when buying CBI coverage. Why? Because oddly enough, many CBI losses are so unique that insurers may not have contemplated such claims when writing the policy. The complexity of policy interpretation remains a problem as the claim profession is only now addressing some of the unique losses arising from September 11, 2001.
This article will discuss the fundamentals of CBI insurance and the issues that could arise from a CBI loss. What Is CBI Insurance?

What Is CBI Insurance?

Contingent business interruption insurance and contingent extra expense coverage is an extension to other insurance that reimburses lost profits and extra expenses resulting from an interruption of business at the premises of a customer or supplier. The contingent property may be specifically named, or the coverage may blanket all customers and suppliers. CBI insurance is also known as contingent business income insurance or dependent properties insurance. Sometimes the term "contingent time element" is used when discussing both CBI and contingent extra expense. Time element simply refers to either business interruption or extra expense coverage. Companies purchase this type of insurance as an extension to their standard property insurance. Coverage is usually triggered by physical damage to customers’ or suppliers’ property or to property on which the insured company depends to attract customers. The type of physical damage must be the same as insured under the controlling policy.

There are four situations in which this coverage is widely used: When the insured depends on a single supplier or a few suppliers for materials. When the insured depends on one or a few manufacturers or suppliers for most of its merchandise. When the insured depends on one or a few recipient businesses to purchase the bulk of the insured’s products. When the insured counts on a neighboring business to help attract customers, known as a leader property.

CBI insurance can reimburse the policyholder in each of these situations, covering the interruption in the insured’s business caused by a peril specified in the policy causing physical damage or loss elsewhere. However, CBI coverage does not protect against the interruption of the same insured’s company’s business from damage to its own plants or third-party plants.
It is not necessary that the customer or supplier property be totally shut down to cause a contingent business interruption loss to an insured. All that is necessary is that an insured loss occurs at the type of location covered under the policy and that the insured’s business be interrupted as a result.
For example, the manufacturing of a supply of embedded microchips for an insured might be partially interrupted by a fire at the suppliers’ plant. The insured may be compelled to suspend production because it can’t obtain the chips. Alternatively, it may be put on an allocation of product. In such a case, the insured will have suffered a contingent business interruption loss, even though the supplier has not been shut down.
Another scenario would be when a fire may close the chip plant completely, but the insured has either ample supply or an alternative supplier and may not be affected or only slightly impacted. In this situation, there may be no contingent business interruption loss, unless the insured cannot find another supplier or has to pay a premium to the new supplier. This scenario could lead into contingent extra expense or CBI in an attempt to avert a business interruption loss.
A good technique that can be used to determine whether CBI coverage applies is to consider the contingent business interruption chain rule.

In the event of: Physical damage to property of a type insured under the insured’s policy To a supplier or customer’s property, either specified or blanket By a peril covered under the insured’s policy Which causes an interruption to the insured’s business operation Then the policy covers: 5. The business interruption loss under the provisions of the insured’s business interruption policy, 6. For the defined indemnity period.

The Contingent Business Interruption Chain Rule

It is important to know what CBI is not. CBI is not: Utility service interruption of an off-premises power interruption Civil or military authority interruption Lack of ingress or egress interruption Interdependency or downstream business interruption, when damage at an owned location causes a loss of revenue to another owned location Loss which results from a change in temperature due to damage to heating or cooling equipment

Contingent extra expense is just that: extra expense coverage resulting from a contingent loss.

Types of Policies Will Impact Coverages

Insurance policies must be reviewed in detail to determine how coverage would impact any given loss situation. Policies will fall into three categories: standard forms, such as forms from the Insurance Services Office, Inc. (ISO), company forms, and finally broker or manuscript forms. Most Fortune 1000 companies will have either a company or manuscript form; with the ISO form occurring most often with middle market or small businesses. Generally, coverage is broader in company forms than ISO forms and even more comprehensive with broker or manuscript forms. Coverage under CBI endorsements is provided during the "period of restoration," which is the time it "should" take the dependent property to affect repairs or restoration "with reasonable speed and similar quality" and resume normal operation. However, because the premises that have been damaged are beyond the insured’s direct control, this presents something of a quandary for both insurer and insured. Access to the damaged property is often not available, thus the insurer has difficulty determining what the reasonable time for restoration should be. The insured may find itself penalized by decisions of a supplier that decides to improve, move operations, or otherwise delay repairs. Further, the period of restoration does not include any additional time it takes the insured to resume normal operations after the dependent location has resumed its normal operations.
Typically, the form will include a "time deductible" in that the "period of restoration" begins a specified number of hours after the time of direct physical loss or damage resulting from any covered cause of loss at the premises of the dependent property. The "period of restoration" generally does not include any increased period required due to the enforcement of any ordinance or law governing repair, reconstruction, or pollution testing or cleanup. The expiration of the policy does not cut short the period of restoration. Some other interesting considerations are that more recent policies contain CBI coverage that covers loss resulting from damage to property owned by others that are not suppliers, similar to the "attractor" coverage cited previously, or that may cover damage to property owned or operated by the insured which is not insured in the policy.
It is generally found that the broader and less restrictive wording in the manuscript forms, as compared to the ISO forms, tends to eliminate the specific naming of contingencies, does not constrain the indemnity period or apply a time based deductible. While wording may become more restrictive after September 11, it is important that companies’ key contingencies are not excluded from the policy. An in-depth look at an insured’s operations will be necessary to consider wide reaching contingencies.
Oftentimes, contingencies may not be a function of a third party but of an insured’s own operations. For instance, companies that maintain massive data processing operations must consider a practicable long-term switch to an alternative system should the data processing unit suffer from a physical loss. If the data processing unit is owned and operated by the insured company, it will not fall under the CBI coverage but rather traditional property and business interruption (BI).
As a result of September 11, many companies are looking to ensure some form of triangulated back-up system. The term triangulation refers to three reference points or three support points. Triangulation is often used to pinpoint the geographic location of a radio transmission or a cellular phone user. Contingency plans that are triangulated will ensure that at least three systems (power, water, communication) are not separate in their grid or supply location to the site.

Litigation and Contingent Claim Challenges of September 11

Historically there are only a few cases that have been decided under a contingent business interruption clause. In Archer-Daniels-Midland Co. v Phoenix Assur. Co., 936 F Supp 534, (July 17, 1996), ADM sought coverage for increased raw materials and transportation costs due to the flooding of the Mississippi River and the resulting crop damage. The federal district court ruled that Midwest farmers and the U.S. government were suppliers of goods and services to ADM. Thus, ADM was entitled to coverage when flooding prevented those suppliers from supplying the company with necessary raw materials and transportation services. The losses from September 11 will likely result in some form of litigation arising from CBI coverage.
Contingent claims from September 11 include damage at an attraction property (World Trade Center) and damage to a variety of businesses and industries that collectively include both suppliers and customers. Further, claims may also include losses as a result of other policy endorsements such as: ingress/egress, civil authority, and service interruption. Many of these losses lack a tangible link to any property damage at the insured’s premises. These less tangible loss areas could be a great challenge for the adjuster because they potentially represent areas of increased subjectivity and scrutiny due to information that may not be available to the company (policyholder). Yet, adjusters will be looking for the greatest level of detail to document their claim analysis to the insurance company.
The most obvious difference between a CBI claim and a BI claim is that an insured is not dealing with damage to its facility and will not be handling a property damage claim. However, the documentation requirements for a CBI usually end up being more voluminous than a typical BI claim. The increased documentation is a result of the analysis and documentation that may have to be completed and compiled to identify the loss impact of an event outside of the insured’s core business and company records. Ironically, these documentation requirements are not discussed in any policies.
Further, policies emphasize that the policyholder will make available their internal books and records and do not discuss information that is outside of the insured’s organization. You need to go beyond the policy to properly document a claim for the insurance company and its representations. (See "Beyond the Policy: Documenting a Business Interruption Claim.") This endless search for documents that may or may not exist can cause great angst to the policyholder. To avoid a battle over documents, the policyholder should take on the responsibility to document the claim as completely as possible in order to communicate an effective and reasonable claim calculation to the adjuster.

Getting These Ideas To Work for You

Establishing a plan to quantify the claim in compliance with the policy will be paramount to obtaining a fair settlement. Look to identify a claim preparation and claim management leader on your team who can champion the effort for your company in an independent and skeptical way that can help you expedite settlement. (See "The Shakleton Approach:Effective Leadership Throughout the Claims Process.") The firm you choose should be independent from your insurance company and their agents, and one that will be engaged by your company.
It is important for the risk manager to consider and be ready for the four key elements to successfully handling a CBI claim. First, you must identify and understand the impact of other business on your operations. Second, plan for such events by having a business continuity plan. Third, consider the need for CBI insurance and incorporate the correct policy wording and limits for your circumstances. Finally, should a CBI event impact your company, be prepared to spend the extra time and effort to identify all the potential areas of loss and document them effectively.

source  http://www.irmi.com/expert/articles/2003/torpey05.aspx

One More Day

Even if i had only one more day
I'd live my life right i swear i would,

I would find a way to love everyday,
and all people as i should
And as they walk let them talk
Let them talk about yesterday

Standing alone, 
mounting their sin upon sin
With nothing within
 
People if i had only one more time to groove
People if i had only one more time to move,
I'd let my soul groove
Live it up, live it up,
No you can't(can) go on forever
Live it up, live it up, ya can't (can) go on forever

People if i had only one more day
I'd live my life right i would
I would find a way to love everyday,
All people as i should
And as they walk let them talk
Let them talk about yesterday
Dreaming alone, yes i wish the best for you,
Now what you gonna do?

Live it up, live it up you can't(can) go on forever
No you can't(can) go on forever
Jah jah kingdom forever

Ode to a city in the sun, with it’s back to it

How shall I go in peace, without sorrow? 

No! 

Not without a wound to the spirit shall I depart from this city. 

Long have been the moments of pain and joy I have spent within its walls, and long have been the nights of loneliness and solitude.

Who can depart from his loneliness and pain and joy and love, without regret?

For too many fragments of my spirit have I scatted within your walls, too many children of my thoughts and longings walk through your hills.

How am I to leave them behind without an ache, without a burden? For at this moment of departure, it’s not a garment I shed, but a skin that I reap with my own hands.

For it is not a thought or a longing that I leave behind, but a heart that has been made and remade sweet, by hunger and thirst that it can not see.

Yet I can’t hang around anymore. I am no longer a welcomed guest of the custodians of the city

What higher form of disrespect, than a guest that overstays his visit? Will he not be treated with contempt? Shall his privileges not be taken from him?

No! I can’t stay hia anymore.

For the sea that calls all, calls me and I must embark.

For to stay, though the hours burn in the night, is to freeze and crystallize and be bound. Yet to leave and look back is to disrespect the sea, her who promises to wave me to new dwellings or perhaps even back to my city of birth.

How I wish I could take all that is in this city with me. But how can I? Can the smoke lift the herbs that produce it? Can my voice carry the lips and tongue that gave it wings? Does not the phoenix without the nest fly across the sky? No! Nothing can be taken from this city, not even her memories.

Oh what sorrow, such joy.

Now I over stand, the deeper that sorrow curves into your being, then the more joy you can contain. Realize that, that which gives you joy is the same that gives you sorrow, and when you weep see the truth that, that which you weep has been your delight. And as such, the balances of these keep the city intact.

And my soul too.

Farewell  my beloved city, farewell, my refuge at that time, my hope of end times, sorrow of this time and joy for all time. Farewell.

All I Seen Today

Yes I want back the picture that hangs on your wall
For where once the sun rose now night falls
Some may say oh what a blue sky in sight
Well now out of the distance I see lightning strike
I will never hide them, hide them all
I could never fear them, fear them all
Over there shall come a new light shinning in this here dark life
For the Most High dwells with man tonight

See the fountain of Eden flow
Was born out of the heart of man
Who could not see them as they pray on them
Just as war fell upon our land, I do not understand
For who Jah choose is why?
Shall bring forth these axes freeing us out of bondage
And we could finally rest our weary souls
In which we fight the holy wars

I want to roll,

I want to hide,

I want to drift away,
Beyond these bombs,

beyond these walls,
Beyond these hypocrites
Oh, but I will never right them, right them all
I could never fear them, fear them all
Over there shall come a new knight shinning in this here dark
life
For the Most High dwells with I tonight
Down in the valley of decision cry
Echoes of the tears shed for life
While they refuse to hear they pray on them
Just as war fell upon our land, I do not understand
Shall bring forth these axes freeing us out of bondage
And we could finally rest our weary souls
In which we fight those holy wars

See them as they come to this a paradise
We shall know them who have come to service upon the right
We  see them as they try to take their paradise
I know them who have come to hide their
Hearts beneath these lies,
And this is all, I've seen today, yes this is all I've seen
today.

Groundation|Hebron Gates|Picture on The Wall

I Post this Blog

I post this blog, structured thoughts,
and poetry prose, 
pursuit of knowledge here is a source, 
word sound power that's my cause, 
this is HeichSpot. 

Words can assimilate so seemingly, 
make repatriation of the mind be willingly, 
cut through prejudice and blindness, 
eternal profound words from his highness. 

So step right in if you will, 
and let thy iron be tempered into steel, 
pieces of my mind you will see, 
my hopes, fears, faith and belief. 
the truth whispers forget me not, 
this is HeichSpot 

let words transcend through time, 
let thoughts change the world, 
a different perspective to all that we be, 
a paradigm shift to all that we see. 
lest we be stuck like a clot, 
still innocent like the inhabitant of a cot, 
this is HeichSpot. 

heicH

Group Personal Accident Insurance Part I

The GPA (Group Personal Accident) policy will cover for injury to employees 24 hours a day regardless of whether they were on official duty or pleasure. it caters for several aspects in event of an injury;

A) Temporary Disability :

based on the number of days off duty that a doctor has awarded the claimant as a result of the injury sustained proof of this are the sick of chits stamped by the doctor attending.

depending on how the policy was arranged, benefit shall be for;

1) the actual daily earnings of the employee per day multiplied by the number of days awarded for sick off

2) or a lump sum per week of injury.

usually the prior is arranged.

B) Permanent Total Disability

this is when the nature of injury is such that the claimant shall not fully recover back to the way they were, say a lost limb or such cases. again the degree of disability is determined by the attending doctor and is based on a percentage say 20% permanent disability.

death in this policy is treated as 100% disability.

C) Medical expenditure ( On reimbursement)

the policy can also reimburse any medical expenses incurred  as a result of the injury and is up to the limit capped by the policy. some policies do not have this feature.

note that the operative word here is reimbursement. spend then we pay you back. thus we shall require the original medical receipts for all payments made.

In summary the documents required are;

• completed claim form (stamped by your organization)
• completed medical certificate (issued by insurance company and written and stamped by the attending doctor)
• medical report copy or treatment notes
• copy of ID of claimant
• copy of three pay slips prior to accident
• original medical bills
• a statement from a witness if one is available ( if injury is result of a road accident then a police abstract)

If the claimant is still undergoing treatment then it is best to just report the claim then be issued with the medical certificate and claim form and submit all documentation once treatment is completed.

we shall discuss how to tabulate the premiums in the next post.