Five Legitimate Grounds for Indemnity Denial under All Risks Policy

All risks property insurance agreements have been catching on in Ukrainian market recently. In this regard a logic question comes up – do they really provide coverage against all the possible perils to which the Insured are exposed in the every-day life? The truth is that apart from quite comprehensible exceptions such as military conflicts, decisions of government authorities aimed at nationalization, confiscation or expropriation of insured property as well as cyber attacks or permanent factors causing natural wear and tear of the insured objects there are some exceptions from “all risks” insurance coverage that actually happen rather frequently.

This article focuses on five of the most painful stumbling blocks which come down to the legitimate grounds on which insurance company can deny indemnity.

1. Mysterious disappearance. It is the disappearance of the insured property with no trace of forceful entry into the premises in which the insured objects are kept. The above also refers to the deficits found out in the course of inventory reconciliation.  The reason for including such cases in the exclusions section of the insurance policy is that plain fact that in most cases the employees of the Insured have something to do with missing property. Sometimes such property exists on the paper only.
2. Project designer’s error, structural defects. If the real estate object which has been put into operation collapses or cracks due to the errors or omissions in the designer’s project or defects in the materials used in the course of construction no indemnity will be paid under property insurance policy. However this risk can be insured by means of adding special clause to the contractors all risks insurance policy subject to additional premium payment.
3. Fraud. That is the most critical exclusion as it is integral part of each and every insurance policy, cargo, property, liability or vehicles alike. Unfortunately logistic companies are the ones who suffer from it most often as they encounter the situations when the carrier disappears together with cargo and the forwarding agent magically disappears without a trace as well. The only way to secure your interests is to choose your business partners more carefully as Ukrainian insurers cannot offer policy covering fraud.   
4. Construction. Building works are the risk envelope for any insured property. Two possible scenarios should be reviewed in this regard. The first one is the case when construction or renovation works take place within the insured territory, the second one – when they are carried out in the neighboring premises, buildings or even held in a significant distance from the insured objects.  Damage caused by the building works carried out within the insured territory is precisely excluded from all types of policies, both named perils and “all risk” one. However some insurance companies agree to cover it for additional insurance premium within the specific limit. The period of such coverage is also limited to the anticipated period of actual works. As to the construction works held off the insured site, they are normally covered on default. Those who prefer to conclude named perils insurance policies should be aware of the fact that they would need to negotiate the coverage of such losses additionally. Most probably, additional insurance premium will also be in place.
5. There is no perfect insurance policy meaning the one with no exceptions from the coverage whatsoever
   Voltage spikes meaning the situations in which the electric cables, household appliances or even multimillion data centers go out of use due the power surges. Though losses are evident, regular property insurance policies, even “all risks” one, are not designed to cover them unless the voltage spikes led to the open fire.    The good news is that there is another type coverage which is available for the companies which rely on the flawless operation of expensive equipment. That is EEI policy (electronic equipment policy) which is aimed at covering against voltage spikes and components’ defects as well as errors in equipment assembling or usage.

All mentioned above allow concluding that there is no perfect insurance policy meaning the one with no exceptions from the coverage whatsoever. Although the thought-out choice of insurance coverage ensures the minimization of unforeseen losses.