The problem with the lack of clarity regarding the time Deductible in Loss of Profits or Consequential Loss Policies

Whenever the Loss of Profits or Consequential Loss policies issued by the London Market establish a Deductible or Excess  of, say 10 days, this is construed as being the first 10 days, and so there is no need to define just how those 10 days must be interpreted.

However, in Spain and other countries this is not the case, and the policies ought to specify just how the Deductible is to be considered:  Do we take the first 10 days?  Do we apply them pro-rata to the indemnity period?  Are they 10 calendar days or 10 working days?  Depending upon how it is interpreted, we will get a different indemnity figure.

It is quite shocking that the vast majority of Spanish Loss of Profits or Consequential Loss policies do not define the Deductible or Excess.  That is to say, they do not specify just how it must be applied and this prejudices the Insurers issuing them.

In effect the Spanish Law 50/80 on Insurance Contract, and consequently the courts, construe that such a lack of definition cannot prejudice the Insureds and therefore it must be applied in the way that is most beneficial for the latter.

Our experience as Loss Adjusters leads us to recommend that Insurers and Brokers should define how the time Deductible or Excess is to be applied.  Very often we have proven that such vagueness has led to the breakdown or deterioration in the relationships between Insureds and Insurers, and due to the lack of clarity concerning the time Deductible, it has taken longer to settle the claim and many have even ended up in the Courts.

It is the opinion of VANTEVO CLAIMS ADVISORS that, since the Insurance Policy is a standard form contract, entered into voluntarily and in good faith between the parties, such lack of precision ought to be avoided as it is a source of problems and conflicts when it comes to adjusting claims under Loss of Profits / Consequential Loss policies in Spain.

It is strange how after so many bad experiences, most of the Spanish Policies still continue to fail to specify just how the time Deductible or Excess must be considered.  It is VANTEVO’s suggestion that instead of stating “10 days” they should state “10 working days and applied pro rata”.  We are sure that this would avoid many problems when adjusting this type of loss in our country.