Page 244 - Fire Insurance Ebook IC 57

Fire and Consequential Loss Insurance

the finished goods at the manufacturer's
premises is a difficult task. Generally there are
two view points. The traditional view provides
indemnity as the net manufacturing costs at the
time of fire, less his designed profits which he
would have added before selling. Excise duty,
if applicable, is also added.

So in simple terms the indemnity provides for the cost
price. The logic behind this view is since the insured is
the manufacturer, he can manufacture similar goods to
replace the lost ones.

The modern view provides that the cost of production
does not really indicate the value of the finished goods.
They think that the finished product is an independent
marketable commodity with a distinct value of its own,
which not only depend on the cost of production, but
also on demand and supply.

So they think that the cost of production can only provide
partial indemnity, but only the market value can provide

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