Page 240 - Fire Insurance Ebook IC 57

Fire and Consequential Loss Insurance

may affect the walls, floors , ceilings, pipes etc. Good
maintenance is always taken as a plus factor while
considering depreciation.

b. Machinery - If the machineries destroyed were
relatively new, the cost of replacement is not difficult
to decide. However, complications and controversies
arise when : (i) the machinery though old, still
performed well for the purpose it was designed, or (ii)
the machineries destroyed are old and outdated and
the rates of obsolence and technological improvement
are high.

In former case indemnity is provision of new
machinery with similar functions subject to
deductions for depreciation. In the latter case, due
to continuous trend of introduction of new
machineries with improved technologies by
manufacturers, it is difficult to arrive at a fair value
and to calculate depreciation.

Sometimes seriously damaged such machines are
indemnified at the scrap value or book value upon the
surveyor's suggestion and with mutual consent.

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