CASE STUDY ONE: Extenstive Storm Damage

The immediate attention to a claim can be the difference between minimal business disruption and long drawn out process that can negatively impact on sales and supply.

Following the recent purchase of three businesses with operations in Melbourne, Sydney, Newcastle and Perth, the Australian parent company invited Midas to participate in a competitive tender for their insurance business. Midas Insurance Brokers won the tender and were appointed in May 2015.

The morning after the policy documents were signed, Midas received a call from one of the Sydney based businesses advising that their premises suffered significant storm damage, resulting in water entering the warehouse and cool room panelling. As a supplier to the major supermarket chains, disruption to supply, particularly for fresh products needed to be addressed urgently. Midas arranged for the assessors report, damaged goods report and photographic evidence to be completed on the same day. Arrangements for alternative office accommodation, bathroom facilities and cleaning of the premises to food grade standard. Were made within 48 hours.

Due to the extensive storm damage in Sydney, the insurance company advised that it would take three weeks for their assessor to assess the damage. The report provided by Midas, was accepted by the insurance company and it was used as the basis for settlement of a claim in the order of $600,000.

CASE STUDY TWO: Bonded Warehouse Burglary

Risk for general warehousing is dependent upon the type of product being warehoused; compare low cost office furniture with a high end wines. The risk changes again in the case of a bonded warehouse.

The insured party, a long-time client, has a bonded warehouse used for the warehousing of cigarettes. In 2005, the bonded warehouse was burgled resulting in the theft of cigarettes valued at over $230,000 which comprised the Cost of Goods, Import Duty and GST. One month later a second burglary occurred, with cigarettes valued in excess of $60,000 stolen. As a bonded warehouse, Customs Australia determined that the client was liable for the duty payable under the s35A of the Customs Act 1901.

Police investigations revealed that the burglaries were not as a result of negligence by the insured party or its employees, subsequently the insurance company was required to pay out the total amount of $290,000. Corrective action included a security upgrade following the second burglary and a modification to the policy held by the insured to include tobacco based products, an item which is specifically excluded under normal circumstances.

CASE STUDY THREE: Misappropriation of Funds

Employees are often placed in positions of trust which occasionally are proven not to be appropriate. The insured party, a freight forwarder based in Sydney, was acting as freight collection agent for customers in Australia who imported goods from Italy.

Freight charges paid by the importer was deposited into a separate Cash Management Account, from which shipping line payments would be made when the goods arrived in Australia. A review of business operations by the insured party identified low cash flow, the insured party assumed that this was because importers were not paying their freight promptly. Having confirmed that all dues had been paid promptly, the insured party commenced an internal investigation which identified that the company accountant had misappropriated funds in excess of $230,000.

As part of the process of the most appropriate insurance policy, the insured party had accepted the Midas recommendation to include "Fraudulent or dishonest activity by an employee which the insured is legally liable to settle" in their policy. As a result, the claim in excess of $230,000 was paid out by the insurance company and the business did not suffer financial loss.