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On Reinstatement Policy & On Account Payment aspect.

There was a fire loss in a Shoe manufacturing Company in Delhi and the insured had taken the policy on reinstatement basis. Due to the fire the insured had incurred a loss of Rs.2.00 Crores on Account of Stocks and around Rs.1.50 Crores on account of Plant & Machinery and Building. The insured had provided all the documents relating to the stocks and provided us the repair/replacement estimate relating to the Building and Plant & Machinery.

After verifying all those documents, we have assessed the loss as Rs.2.0 Crores on account of Stocks and Rs.1.50 Crores on account of Building and Plant & Machinery and based on our report the underwriters had released around Rs.2.30 Crores as on account payment to the insured.

In some cases, while reinstating the building and Plant & Machinery, (financially as well as physically), the insured may reinstate the Plant & Machinery from some other suppliers (may be at a lower cost or lower quality) and totally different machinery from the originally installed, and after reinstating the same they provide the reinstatement bills along with the payments proofs, which even may be lesser than the initial estimates provided by the insured or may lesser than the on account payment released by the underwriters.

In such circumstances, the surveyor must also assess the loss on market value basis and recommend the on account payment based on the market value basis only.

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