Page 295 - Fire Insurance Ebook IC 57

The Insurance Times

n The trend may be downward in a declining business, and this
calls for corresponding adjustments.

n A trend, either upward or downward, must therefore be taken into
account when arriving at the rate of gross profit.

Variations and special circumstances:

n The problem of trends is the type of adjustment most frequently
met. Variations in, and special circumstances affecting, the
business are not always so easily traceable from the accounts.

n If a firm has just completed installation of additional improved
machinery, and it can be shown that, but for the fire, substantially
increased turnover would have resulted, the stocks of raw materials
would have been available, and that sale of the increased quantity
of finished goods could have been achieved, then, on the
assumption of an adequate insurance to cover the greatly
enhanced gross profit anticipated, the company will indemnify
the insured accordingly, by operating the "adjustments clause"
to allow for the variation from pre-fire trading.

Departmental clause

n If the business is conducted in separate divisions or departments,
(for example a Company may have four divisions of brewery, wines
and spirits, mineral and soda and bottling) and the trading results
of each division are separately maintained, then the loss can be
calculated, as per the specification, separately for each department
affected by the damage.

n But average is applied if the sum insured is less than the aggregate
of the sum produced by applying the rate of gross for each

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