Insurance - Natural Peril Exclusions - Flood

2022-06-11 01:23:28 By : Ms. Aileen Lee

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Flood is commonly covered by ARPI policies but, on occasions, some policies exclude it or, alternatively, provide the client with the option of extending the policy to cover it as an additional peril. The meaning of flood has been considered infrequently in the English courts and, the courts have first to consider the meaning of flood in the context of the policy as a whole. In the case Young v. Sun Alliance and London Insurance Ltd. [1976] 3 All ER 561, where the word “flood” was incorporated in a phrase with “storm and tempest”, it was held not to cover damage caused by three inches of water leaking into a bathroom from an underground spring-storm and tempest suggested a more violent event.

In the case of Computer & Systems Engineering Pic v. John Lelliott (Ilford) Limited and Others (The Times, 23 May 1989), during building operations at the assured’s premises, a metal purlin was dropped onto a sprinkler system pipe. The pipe was damaged, allowing water to escape which in turn damaged the property of the assured. The court was asked to decide whether or not the property owner was obliged to bear the risk of damage under clause 22C: 1 of the JCT Standard Form of Building Contract (1980 Edition) because the damage was not caused by “flood” or “bursting of pipes” within the definition of the clause 22. First, the court considered what an ordinary reasonable Englishman would say if asked “What was it that caused the damage?”. His answer would have been “the negligent dropping of the purlin which fractured the sprinkler pipe”;

As a result of the lack of direct case law, the court referred to the various insurance cases dealing with the term “flood’*. It relied upon Young v. Sun Alliance (above) and Commonwealth Smelting Limited v. Guardian Royal Exchange Assurance Limited [1986] 1 Lloyd’s Rep 121, as supporting the propositions that:

– flood should involve some natural phenomena or abnormal occurrence; and

– “bursting and overflowing” were to be construed intransitively, involving some interruption of a pipe from within. (In other words, without the assistance of extraneous factors.)

Therefore, the damage to the sprinkler system constituted neither a flood nor a bursting or overflowing of water from tanks, apparatus or pipes. The Court of Appeal confirmed the decision suggesting that the word “flood” suggested the invasion of property by a large volume of water caused by a rapid accumulation or sudden release of water from an external source, usually, but not necessarily, as the result of a natural phenomenon such as storm, tempest or downpour. Certainly, US authorities have not distinguished between man-made floods (such as the bursting of a dam) and floods resulting from natural perils.

Thus, as when considering the definition of any phrase within the context of ARPI, a court will:

– look at the context in which the word is found;

– enquire as to whether or not the word has any ordinary meaning in common parlance; and

– look at judicial precedent to see where the courts have previously been required to consider the word in a similar context.

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Isn’t real estate supposedly one of the best categories of investment classes in the world? People always need a place to live right? Then why does it seem almost impossible to invest in real estate in California, which is known next to New York and Florida, as one of the top places in the world to invest in real estate, unless you have a few million dollars? It is because they are densely populated and in the case of Los Angeles have already risen dramatically not only in the last six years by 40% but have quadrupled, 400%, over the last 30 years. (S&P Index LA) Those are great returns for an asset that is considered to be safe and moderately growing. So what should a person do nowadays if they live and grew up in Los Angeles, and want to invest in real estate but don’t have a million dollars to invest? The solution is simple, invest out of state!

A lot of people think it is hard to invest in a state such as Texas. You have to manage the property, collect rent, and make the right investment decisions for the long term in a state that at this point in time you are only somewhat familiar with, right? Well allow me to explain to you why it is great for someone to think otherwise, and how a great agent can acquire property for you in another state in a deal which the tenants, the ones using the property space, are managing the property for you and even paying your property taxes! Not only that, but these are institutional companies who guarantee you the money you are promised for periods of up to 10-15+ years, per contract. This is only the beginning of me explaining how investing outside of your comfort zone with the proper advice can benefit you and your family.

How about the safety of these investments? I don’t want to lose my hard earned dollars. Neither do you. So why would you invest in anything outside of the Los Angeles, or the California region? A region that has proven itself for decades and showing promising signs of growth in certain areas. These are definitely valid points in the eyes of an avid investor, but maybe it’s time to reconsider. I already mentioned that property prices in Los Angeles are expensive, that being one of the main reasons to invest elsewhere.

Haven’t you noticed a lot of people who have been living in California are moving to the surrounding states where it is a lot cheaper to live and in places where new and old business industries are beginning to thrive? I personally know a few people who have moved away. Texas alone has added over 5 million people to its population in the last thirteen years according to Texas Department of State Health Services, and it is still growing. With that in mind, doesn’t it seem like a great deal to acquire a commercial property in a state where you can buy commercial real estate for around $150,000-$300,000 down? You couldn’t dream of that in Los Angeles unless you wanted to buy an old run down building.

Are you starting to understand how easy it can be to invest outside of your state, and why it is more lucrative? If you do, that’s great, if not here is another way to understand it in a situational scenario with numerical figures.

My friend Jack has $500,000 right now that he wants to invest.

This is what would happen if Jack invested in a Los Angeles Commercial Property from 2015-2020.

Let us say Jack doesn’t take out a Loan and buys a Fee Simple Commercial Estate.

$500,000 x 4% Interest Yearly = $20,000 Income / Year (Before Taxes) x 5 years = $100,000

Over this period of time the value of the property goes to $600,000 by 2020, and Jack sells his property to Jenner. That makes for a profit of $200,000 before Capital Gains, and Income Taxes.

Now, let us say Jack went outside his comfort zone and decided to get a property in Texas.

$500,000 x 8% = 40,000 Income / Year (Before Taxes) x 5 Years = $200,000

Over this period of time the value of the property goes up to $750,000 and Jack now shows Jenner how much easier it was to invest out of state because of the structure of this deal. He told Jenner that since Starbucks was managing his property and paying him on time without question every month, this made it much easier for him as an investment. Now, Jenner wants to buy this investment off Jack, because he sees the benefit and Starbucks wants to sign again for an additional 10 years with a rent increase!

Jack just made another $250,000, on the increase of the value of the property.

In total, Jack has now accumulated $450,000 before taxes over the last 5 years investing in Texas. Get it?! Do you understand the benefits and the financial rewards? Not to say you cannot have these structured deals in Los Angeles, but remember they offer half as much interest in a market that has already gone up 40% in the last six years.

Jack has made $450,000 investing in Texas vs. $200,000 investing in California with the same amount of money. That’s an extra 125% increase in profit, which will make you an even astonishingly larger amount of money on your next big investment!

American Depositary Receipts (ADRs) are instruments that allow U.S. – based investors/traders to buy shares in foreign (non – U.S.) corporations in U.S. Dollars and in a form that is tradable on U.S. exchanges in the same way as domestic stocks. For the U.S. – based investor the advantage of ADRs is the convenience of not having to deal with the additional complexities of foreign exchanges and the varied share registration requirements of foreign jurisdictions. Companies based in other countries are motivated to have their shares listed in the U.S. in this way because it deepens their investor base in a capital market that is the deepest and most sophisticated in the world.

Most typically foreign corporations making use of this facility issue so-called sponsored ADRs. One designated depositary institution holds the the underlying stock in the country of origin and issues the negotiable securities called American Depositary Receipts that represent ownership of the underlying foreign securities. Three New York banking institutions dominate this market; Bank of New York Mellon, Citibank and JPMorgan Chase. Note that investment in ADRs still involves exchange risks as the U.S. Dollar share price of the ADR will always be based on the price of the underlying shares translated into U.S. Dollars at prevailing exchange rates.

Well-known foreign companies traded as ADRs include BP Plc (stock symbol BP) and GlaxoSmithKline (GSK) of the U.K.; Bayer (BAY) and Deutsche Bank (DB) of Germany; Novartis (NVS) and Credit Suisse (CS) of Switzerland; Sony (SNE) and Toyota Motor (TM) of Japan; Nokia (NOK) of Finland; and Grupo Televisa (TV) and Coca-Cola FEMSA (KOF) of Mexico.

Simply put, many private individuals and business owners choose air freight because of the speed factor. Besides, there is no limit to the volume and measurements of consignment that can be delivered. These include motor vehicles, machineries, appliances, furniture, and electronic items. While there are various transport modalities, each method has its own advantages and downsides. Air freight is preferred mainly for high-value but low-volume cargoes. It is important to look at the positive aspects carefully.

It is the quickest method of transporting all types of merchandise compared to sea freight or road moving. Schedules for departure and arrival are generally reliable except if there are weather problems or valid reasons for flight delays. Cargo flights are scheduled to depart very hour. There are also fewer risks of losses and because of advanced security measures. Safety regulations in most airports are enforced strictly. Moreover, these companies employ highly developed anti-pilferage methods to prevent or minimize exposure to burglary and damages.

You can send goods to almost any part of the globe. Most of cargo transport airline firms own a massive network of destinations worldwide. Insurance coverage is essential for your cargo. Premiums are quite low compared to sea or land transportation because of short travel time. Air freight may be more expensive but insurance fees are lower. This means substantial savings on the part of exporters.

You may not require local warehousing anymore due to the quick transit time. At the same time, it will not be necessary to keep products in stock. Customs clearances and inspection of cargo can be faster than port checks. Air cargo handlers are also more competent enabling you to save on man-hours and financial resources.

More often than not, air freight service providers require simple packing as against shipping consignments. In short, you save both on time and funds for additional and heavy packing. Air freight cargo monitoring makes use of the most advanced computerized tracking systems. You can use one of the latest software applications that permit you to check on the status of your things from departure, transport and arrival. You are updated of the cargo’s whereabouts from time to time.

These are among the major benefits of air freight. Once you have made your choice on the transport mode, it is time to look for the best service provider. It will be advisable to ask from for referrals from people you know and trust.

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