From Partial Damage Assessment to Total Loss Recognition: Resolving a Complex Fire Claim in an Edge Banding Facility

Date of Loss:

28th May 2023

Subject:

Special Case Study on Claims under IAR Policy

Client:

India’s Leading Laminates & Surfacing Solutions Manufacturer

Type of Claim:

Loss due to fire in Edge Banding Section

Claimed Amount:

Rs. 2,91,50,517/-

Final Settlement Amount:

Rs. 1,58,98,081/-

Basis of Settlement:

Market Value Basis

Items Affected:

Damage to Edge Band Section of Line Number #1 & #2 along with stock of raw materials in form of solvent and chemicals, granules, WIP ink etc.

Reason for Deviation:

At the outset, we would like to state that, as per the prima facie observations of the surveyor, out of the two lines of the edge band machine, Line No. 1 has sustained total damage while Line No. 2 has suffered partial damage. However, as per the client’s representation, both lines have been equally damaged due to the fire incident.

Brief Details of the Claim:

It is understood that the fire originated at the top of the printing station of Line No. 2 in the edge banding section of the insured premises. The fire subsequently spread to other portions of Line Nos. 2 and 1, primarily due to the presence of highly flammable materials, namely WIP ink and thinner, which were stored in buckets in their pure form and also being used in the process through motorized application.

Major Challenges Associated With the Claim:

• It was observed that the surveyor maintained a firm and consistent stance in their assessment, concluding that the total loss is confined to Line No. 1 only, while Line No. 2 has sustained partial damage and is considered repairable.
• The surveyor firmly recommended that a joint physical inspection be carried out in coordination with the Taiwan-based OEM in order to accurately ascertain the extent of damage to the critical machinery pertaining to Line Nos. 1 and 2. As per the surveyor’s observations during the site visit, the Edge Banding Section comprised two PVC Edge Banding Machines (Line No. 1 and Line No. 2) imported from Taiwan, which were affected by the reported fire incident. The surveyor opined that the damages to these machines appeared to be partial in nature. Accordingly, the surveyor strongly advised the Insured to take expeditious steps to arrange for inspection of the machines either through an authorized repairer of the OEM, if available in India, or alternatively through any other competent and qualified repairer.

Actions Taken by Salasar to Address the Issues:

• As regards the condition of the fire-affected equipment for both Line Nos. 1 and 2, a detailed inspection through video call was carried out by our client in consultation with the OEM to assess the physical condition, functional aspects, and product quality of all critical components, including major crucial equipment like Cooling Water Tank, Front and Back Side of Extruder, Haul-Off Unit, Printing Line, Tensioner Unit, etc.
• It was informed by our client that, due to the ongoing COVID pandemic, the OEM engineer was unable to visit India physically; however, the inspection was facilitated through virtual means via video call, enabling the OEM to observe the damaged machinery and provide their inputs. Based on these observations, detailed draft reports for both lines were prepared by the OEM.
• It was suggested by the surveyor to obtain a detailed technical report from a chartered engineer in lieu of the OEM report capturing the parameters of the individual sections of the edge band machine and justifying why the same should be treated as total loss duly certified by the OEM. This matter required in-depth discussion and preparation of a technically viable report of the edge band machine Line 1 and 2 by Salasar technical team, based on which the OEM had finally submitted their report certifying replacement of the machine sections.
• It is pertinent to note that the reports were structured in a manner indicating that replacement of each major component with new parts would result in restoration costs exceeding the cost of procuring entirely new machines. The draft reports were subsequently reviewed in detail by our technical team, who identified and addressed certain significant technical inconsistencies in the OEM’s observations.
• It may be noted that, had these reports been submitted in their original form to the surveyor, there existed a strong possibility that the losses for both lines would have been considered on a partial damage basis. However, upon thorough evaluation of the reports and the OEM’s confirmation, the surveyor ultimately opined that:

“In view of the confirmation/opinion given by the OEM, we also feel that both the machines (Line 1 & 2) require replacement.”

Final Conclusion:

Despite several hurdles and challenges encountered during the course of the claim process, the matter was handled efficiently and diligently by Salasar. Through consistent follow-up and systematic technical resolution of each issue raised, the claim was ultimately settled amicably by the Insurer to the fullest satisfaction of our client.