Many insured consumers may be in for a nasty surprise for wrongly believing that they enjoy blanket cover from their insurer. The reality is however that their cover is limited to that specifically agreed with their insurer.
The cover usually relates only to physical damage sustained to an insured object, meaning that, unless otherwise agreed, any consequential loss stemming from the damage to an insured object is excluded. Consequential loss is best described as an indirect loss, not related to the value of an insured object.
EXAMPLES OF CONSEQUENTIAL LOSS
Fire insurance
A craft brewery burns down one evening after the electricity was restored following loadshedding. Due to the extent of the damage sustained, the brewery is unable to trade for several months. The physical damage sustained to the brewery's premises and equipment is recoverable from the brewery's insurer whereas the consequential loss of profit is not.
Motor vehicle insurance
A student's motor vehicle is severely damaged by another motor vehicle whose driver failed to yield at a traffic light which was not functioning following cable theft. The estimated time for repair of the vehicle is 3 months. The student is forced to make use of an Uber to attend class each day over the period of repair. The physical damage sustained to the student's vehicle is recoverable from the student's insurer whereas the consequential Uber costs is not.
Travel insurance
A businessman is scheduled to travel from OR Tambo to Heathrow to attend a meeting with a high-net-worth investor in London. The businessman's plane is delayed for several hours due to a severe highveld thunderstorm. The businessman is unable to contact the investor due to the network being down following the storm. Upon arriving in London several hours later than expected the businessman notices that the padlocks on his travel bag have been tampered with and several of his personal belongings are missing. To add insult to injury, the businessman is informed by the investor that the investor is no longer interested in meeting with him given that he is several hours late for their meeting. The stolen items are recoverable from the businessman's insurer whereas the consequential loss of investment is not.
CONCLUSION
Consequential loss is a real possibility, for which cover is available, at an additional premium. The benefits of possessing cover for consequential loss may be immense; just ask the various businesses who would have had to shut their doors permanently following the Covid hard lockdown had it not been for business interruption insurance. Consumers would as such be well advised to ensure they are adequately covered to avoid a nasty surprise when claiming from their insurer.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
