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Question…

In a situation where damage is done to third-party property and our at-fault insured client undertakes the repairs to remediate, to what extent can our client legitimately recover their normal mark-up (beyond their costs), under the liability policy.
Given that the mark-up is not their actual "profit" margin as they have expenses and overheads that would be deducted before any profit was made I would have expected that a court might find that they are entitled to a least cover their actual costs plus a reasonable contribution to overheads.
My approach would be to calculate their net profit from their financial records and apply that rate as a discount to the invoice presented. Right or wrong?

Reply…  Crossley Gates

This is a liability policy. The insured can claim under the policy the amount that the claimant can legally recover from it, in all the circumstances. True to the principle of indemnity, the insured can't claim more than this. 

If the claimant contracts another party to fix the damage caused by the negligence, the insured is legally liable for that amount, assuming the cost is necessary and reasonable. 

The insured remains legally liable even if the insured carries out the repairs itself. But what is the cost to the claimant (for which the insured is legally liable?). It is tempting to say nothing, but I think that is superficial. Technically, the insured could charge the claimant for its own costs in carrying out the repairs, but it couldn't charge the claimant a profit twice for the same job. 

In turn, the claimant holds the insured liable for this amount. In practice this is netted off so that the claimant is not charged anything further on the basis that the insured is legally liable for this amount anyway. The insured then claims this amount from its liability insurer.

Ironically, the underwriter obtains a partial windfall from this scenario - it is saved paying the profit element. It would have had to pay this if the claimant had used another contractor and the insured would have been liable for this increased amount. 



December 2018

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