Page 343 - Fire Insurance Ebook IC 57

The Insurance Times

business activity, and as the measure of loss,
in the majority of calculations of consequential
loss insurance.

Every unit of production earns its due proportion of gross
profit, and the loss of gross profit can be measured easily
by ascertaining the ratio of gross profit per unit of
production and applying it to the shortage in the number
of units produced, its output. The rate of gross profit is
defined as the rate of gross profit per unit earned on the
output during the financial year immediately before the
date of damage.

The output method is adopted where the loss
measurement under turnover basis does not provide a
fair indemnity to the insured as when accumulated
stocks are used by the insured to maintain the turnover.
In this case though there is no reduction in turnover, but
obviously reduction in output.

So if this output method is used, it helps the insured and
make the loss payable. On the other hand if turnover

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