Section 2 - Consequential Loss
The cover provided in the Property Damage section of the Policy protects the Board of Management in respect of material loss or damage which can occur. However, if as a result of loss or damage insured under that Section to any of the buildings normal duties and activities cannot be carried on, increased costs can accrue or loss of revenue may result. The Consequential Loss section of the policy protects against financial loss suffered by the Board of Management during this period of interference or interruption. The financial loss suffered is limited to 15% of the sum insured on the building. The limit may, of course, be increased on request.
Can you give me an example of how this consequential loss cover applies?
To illustrate the cover provided let us assume that school activities are interrupted or disrupted as a result of a serious fire or severe water damage. In these circumstances, to continue the normal activities of the school, it will be necessary to hire alternative property or to obtain temporary classrooms.
What is the extent of the cover?
The cover is set at 15% of the sum insured of the building. In normal circumstances 15% should be adequate. In the event of minor damage many schools will be able to accommodate pupils elsewhere in the school. In the event of major damage it will be necessary to build temporary classrooms (including services) and the cost will depend on the availability of land upon which to erect temporary buildings.
If the school, however, is located in the city centre with no land upon which to erect temporary buildings, then 15% may not be adequate. A higher amount may be required and the policy can be amended accordingly.
What about other financial loss?
Section 2 provides cover for any financial loss which results from damage covered by Section 1. For example, you may lose revenue as a result of loss or damage to the buildings e.g. loss of school fees, loss of revenue from the hire of school buildings to outside groups etc., and these losses are covered.
However it is important to fully assess all of the potential exposures to financial loss when deciding on the adequacy or otherwise of the 15% of the buildings sum insured.