Property damage and business interruption claims examples

Change in temperature

A research and development company produces samples which are sensitive to increases or decreases in temperature. The samples are stored in a single freezer at their premises. The company’s cleaning contractor unplugs the freezer to power a vacuum cleaner, then leaves without plugging the freezer back in. the samples thaw and are not recoverable. The property damage recreates the samples including the time spent in redoing the work; the business interruption (R&D Expenditure) covers the fixed costs and expenses of the downtime whilst the samples are recreated. In a non-specialist cover, this would be excluded under a spoilage exclusion.

Indemnity period

A pharmaceutical company manufactures products in a clean room located at their premises. Following extreme cold temperatures the air conditioning plan fails, resulting in a water leak. The water collects in the clean room, the water is considered contamination and the clean room can no longer be used. As the contamination has been caused by a defined peril full policy limits apply. The property damage reinstates the damaged property, however the main issue is the business interruption as the premises cannot continue after the reinstatement until such time as the regulator has approved it for use. An appropriate indemnity period to cover the interruption is an important consideration for all controlled environments.