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ENERGY & POWER NEWSLETTER

Demystifying Common Clauses

Demystifying common clauses: a closer look at 'expediting expenses'.
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29/04/2021

In this regular feature, we take a look at common clauses found in energy insurance that are often not well understood, and try to look at what their intentions are, and what they cover or exclude.

In this article we examine expediting expenses.

Many property damage policies contain a sub-limit for expediting expenses but what does this cover?

Expediting expenses coverage is similar to extra expenses coverage and is usually an extension to a gross earnings business interruption policy. It provides indemnity for costs incurred to continue the operations of the business, to a level that is as near as possible, to the level prior to a loss (such as renting temporary properties).

Usually the coverage is limited to reasonable and necessary extra expenses incurred by the insured, subject to an agreed sub-limit of liability. However, some forms of cover may be limited to the amount of business interruption claim saved by the action. For example, cover is applied if US$90 is spent to save a loss in revenue of US$100, but if US$110 is spent to save USD$100 of revenue, the claim is limited to US$100.It is sometimes possible to extend the business interruption section of a policy to include cover for ‘additional extra expenses’ (subject to an agreed sub-limit), if a business needs to spend more than it will save in order to continue normal business operations. For example, to avoid loss of market share.However, ‘expediting expenses’ differ from extra expenses as they are usually an extension to the property damage section of a policy.

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Expediting expenses clauses usually cover the expenses of temporary repairs, and costs incurred to speed up the permanent repair or replacement of covered property or equipment. This could include measures such as overtime or additional costs incurred for express or rapid transportation.

Unlike extra expense clauses, expediting expenses are not restricted to having to reduce a business interruption loss. However, expediting expenses will typically be subject to a sub-limit of liability.

The above is provided as a general overview of some of the coverage often provided by the aforementioned clauses. This is not intended to be an extensive and exhaustive analysis of the insurance coverage provided by such clauses. The comments above are the opinion of the Marsh Specialty only, and should not be relied on as a definitive or legal interpretation. We would encourage you to read the terms and conditions of your particular policy and seek professional advice if in any doubt.

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“Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions. This website contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements available from JLT Risk Solutions on request. Full information can be found in the JLT Risk Solutions Financial Services Guide.”