Demystifying Common Clauses

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.

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.