Ab initio

Insurance policies are void or voidable ‘ab initio’, i.e. from the beginning, if there is a breach precedent to the policy.

Accidental damage cover

Cover under a policy that provides all the benefits of standard named perils policy plus accidental damage cover, e.g. spilling paint on a carpet or computer. Under a named peril policy a loss has to be matched to a named peril.

Accountants’ clause

A clause in a business interruption policy which indemnifies you in respect of the cost of an accountant’s fee in respect of preparing and submitting the claim. Without the clause, the cost would not be covered.

Act of God

Natural occurrences (earthquake, typhoon, etc.) that no amount of human foresight could have avoided. It is a defence against strict liability in tort. An example of this is seen in Nichols v. Marsland (CA 1876) where the defendant was not liable when exceptionally violent storms caused his artificial lakes to flood his neighbour’s land, but the defence is of very restricted application.

Additional Increase in Cost of Working

An optional extension under a business interruption insurance. It allows you to incur reasonable additional expenditure to avoid or diminish any further reduction in turnover following a loss even if the amount payable exceeds the saving made. Without this extension you would only be able to recovery additional expenses that are economic and agreed by the insurers i.e. they will only agree to spend £1 to save at least £1. The extra cover is for a specific sum.

Adjustable policies

Policies where, at inception, the insured estimates the amounts of key variables such as turnover or wages. The premium is based on this estimate but adjusted up or down at the end of the year when the actual figure is declared by the insured. Any return made to the insured is subject to a minimum premium.

Advance profits insurance

A form of business interruption insurance relating to a new business or a new activity for an existing business. It covers loss of gross profit following delay consequent upon damage insured under a contractor’s all risks or erection all risks policy.

The delay in starting the activity may be due to damage to: (a) the new works, extension or machinery; (b) suppliers’ premises; (c) machinery in transit. The indemnity period commences on the date production was intended to start and continues until it does actually start, but any increase in cost of working is calculated from the date of loss.

Aggregate limit of indemnity

The maximum amount that the insurer will pay in respect of all insured losses that occur during the policy term. No further claim is payable once the limit has been exhausted unless it has been reinstated by policy condition or agreement. Aggregate limits are common to professional indemnity insurance and product liability insurance.

All other contents clause

A phrase in the basic specification wording of the standard fire policy to extend cover to forms of property otherwise excluded. The term includes money and stamps, national insurance stamps, documents, manuscripts and business books, computer systems records, patterns, moulds, plans and designs, employees’ pedal cycles and personal effects. Monetary limits are usually applied to the majority of these items and cover in respect of plans, documents, etc., is limited to the cost of labour in writing them up and not their market values.

All risks

A term describing a property insurance covering any fortuitous loss or damage that is not specifically excluded. This contrasts with a policy covering physical loss or damage caused by a named peril, e.g. fire. The ‘all risks’ exclusions relate to inevitable forms of loss, such as depreciation and wear and tear, and other losses due to gradually operating causes. ‘All risks’ cover is available for personal possessions, cameras, jewellery, industrial equipment and goods in transit, and applies to Institute Cargo Clauses A. Under household and commercial policies on buildings and contents, and cover on motor vehicles, the term has given way to ‘accidental loss or damage’ as a means of going beyond named perils cover.