Case Studies
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Read MoreAn overspeed incident damaged a steam turbine (ST) to the extent that the machine could not operate or be replaced within the 12-month Maximum Indemnity Period. In the meantime, the insured had to import electricity from the grid (Saudi Electricity Company or SEC) to supplement the power from the remaining two STs. We were asked to assess the Increase in Cost of Working (ICOW). No loss of production was sustained as paper manufacturing continued.
A claim was presented for ICOW of $1.36M for the electricity purchased from SEC. Typically, the insured did not purchase any electricity from the grid. Our main observation was that the insured had not deducted any offsetting savings in gas cost, which would have been used to generate steam (and hence electricity) on the damaged ST. We calculated the average consumption in MMBtu per MWh of generation and used this to calculate the gas savings based on the actual electricity purchased from SEC.
Further, we also observed that the sum insured was inadequate based on the 2021 results of the business (it had been in 2020 when the policy was placed). Therefore, discussions were undertaken with insurers as to whether an adjustment should be taken as it was borderline 85% (condition of average). The broker provided additional details on which the sum insured was set and, by following the same methodology, revealed underinsurance to be worse than originally calculated. Discussions were also had with brokers and (re)insurers about whether the Additional Increase in Cost of Working (AICOW) coverage could be a backstop for the under-insured loss.
We understand that the insured has reluctantly accepted our measurement of $0.1M as part of the overall settlement, which includes partial replacement of the turbine (the insured having also originally claimed a complete replacement of turbine, gearbox, and all associated peripherals both damaged and undamaged).
Daniel Thorpe
Executive Vice President
Forensic Accounting - Insurance Services
+971 56 658 3620
[email protected]
> Business Interruption / Lost Profits
We provide specialized expertise in the quantification of damages related to claims and disputes involving business interruption and lost profits. Our team combines their financial expertise and diverse backgrounds to effectively evaluate the insured's/claimant's operations and industry/market-specific factors, to quantify interruptions and lost profits.
> Forensic Accounting
Our Forensic Accounting Practice includes Certified Public Accountants, Certified Fraud Examiners, Certified Financial Forensics experts, and other financial experts who specialize in financial investigations, dispute resolution, and regulatory compliance. We deliver the truth behind the numbers in financial matters involving insurance claims and disputes, business interruption/lost profits, cyber damages, Delay in Start-Up (DSU) / soft costs, extra expense, family disputes, fraud, labor & employment disputes, personal injury damages, and bankruptcy/insolvency.