QUESTION:
We have a client who had $60,000 of GIB stolen from a commercial construction site. The claim for the GIB was settled after a few months while the loss was adjusted. However, the client has asked for a claim to be made for the costs of the site security guards and a portable security camera system immediately hired after the loss up until claim settlement to help prevent further loss. These costs total around $15,000.
The policy covers "Protection Costs" up to $10,000 with a $1,000 excess:
8. Protection costs
We will pay for Protection Costs being costs, reasonably incurred by the Insured for the purpose of, and for damage directly resulting from, fighting or controlling any cause of Loss that involves or threatens to involve Property Insured.
There are no other exclusions or limits to this coverage. The insurer is noting that it is not the intent of the policy to cover these types of costs, and also it was not reasonable to incur these costs, as the client had fencing temporarily repaired within a day, which negated any increase in risk of the site being hit again.
Given the wording is very open, should these costs be covered as being reasonable given the increased criminal activity targeting the construction sector?
CROSSLEY GATES REPLIES:
The costs must be reasonably incurred (an objective test) to fight or control the cause of the loss. The cause of the loss was burglary.
Whether costs are reasonably incurred is largely a factual test based on all the background circumstances. It seems from what the insurer says that the thieves gained access by breaking a fence. The fence was temporarily repaired the next day.
Whether this was enough to fight and control the cause, or more was required, will depend on many factors:
- The thieves wanted the GIB. The shortage of GIB is public knowledge. Was there any more GIB left on site for the thieves to steal subsequently?
- Did the repair of the fence reinstate its full level of security?
- Was a higher level of security reasonably required given this level was obviously insufficient to stop the GIB being stolen?
It is not possible to give a definitive answer as a great deal more information would be required, but hopefully, this gives you a feel for the issues.
