Pecuniary Insurance

LESSONS LEARNED

• Before the restaurant do a closing, the workers should check properly all of their equipment's and electrical appliances. They have to make sure if the equipment's and appliances are turned off completely especially in the kitchen area. This is because the kitchen area has a high tendency for fire to happen.

• The restaurant should consider on installing fire extinguisher appliances especially fire sprinkler. Fire sprinkler should be installed in the kitchen area to slower down the spreading of fire. By having fire sprinkler, the fire may not be spread to the other area of the restaurant.

The general manager of a popular sushi restaurant that was gutted by fire Wednesday said the extensive damage means it could be at least six months before the restaurant reopens.

Fire caused at least $300,000 damage to the Sen Zushi Japanese restaurant. The kitchen is unusable but the building is structurally sound, says the restaurant's general manager.   Photograph By ADRIAN LAM, Times Colonist.

The building is still structurally sound, she said.

Fire broke out in the kitchen of the restaurant, located at 940 Fort St., about 5 a.m. Wednesday. Firefighters had trouble reaching the kitchen and had to smash through another door.

LESSONS LEARNED

a)      The flower shop should consider opening another outlets in order to recover loss. If there is loss happens at the main shop, there is still another outlets that can gain profits and cover the loss that occurs at the main shop. So by this way, loss can be reduced. In this case, Kamelia only opened one outlet of her flower shop, so it is a total loss.

b)      The business owner should consider the geographic factor of their shop. They should choose a strategic and appropriate location to open their business. In this case, Kamelia should avoid location that have a high possibility for storm to happen.

strategic location

open another outlets

1. Kamelia’s Flower Shop has to close their shop for about a month for the recovery of their shop. For a month they will not get any profit income and experience some losses because they could not serve their customers’ needs. Also they have to wait for a new cooler to store the flowers.

CHRONOLOGY CASE 1

Period of cover : 1^st January 2013 until 31^st December 2013

Duration of cover : 1 year

Interruption : 10^th August 2013

Interruption period : 1 month

INTERRUPTION RISK

Based on the situation of Kamelia’s Flower Shop, the interruption risk is the storm. Storm is one of the natural disaster which is covered under Consequential Loss Insurance policy.

INTERRUPTION LOSS

a)      Loss of future profit

b)      Additional expenses such as : utilities, rent, wholesale product, supplies

c)       Cost of replacement

additional expenses

loss of profit

CHRONOLOGY CASE 2

Period of cover : -

Duration of cover : -

Interruption : 16^th April 2014

Interruption period : 6 months

INTERRUPTION RISK

Based on the situation of Sen Zushi Japanese restaurant and sushi bar, the interruption risk is the fire.  The fire caused by sparks from a rice cooker left on for overnight.

INTERRUPTION LOSS

a)      Loss of future profit

b)      Additional expenses such as : utilities, rent, supplies

c)       Cost of replacement for floor, walls, ceilings, interior design such as their expensive Japanese art.

loss profit

Kamelia’s Flower Shop rents a commercial space in a downtown area. Kamelia’s income is derived primarily from purchasing wholesale live flowers and creating arrangements and selling those arrangements at retail. Before that, Kamelia has Consequential Loss insurance policy which has a coverage from 1^st January 2013 until 31^st December 2013. Kamelia’s shop has coolers to preserve the arrangements, an area to create the arrangements, and a retail space for customers. Kamelia’s rent and utilities are his highest expense. To save costs and increase profits, Kamelia’s purchases its wholesale flowers in bulk through a local distributor with a long-term contract. Let's say Kamelia’s clears RM 500 per day. Of that amount, RM 350 is cost for utilities, rent, wholesale product, supplies, and etcetera. Kamelia’s makes RM 150 per day which is acceptable to Kamelia.

Then on 10^th August 2013, the storm comes. Kamelia’s shop is wiped out. The commercial space is uninhabitable. The coolers are gone. A shipment bound for a customer is gone and the stock is gone. Kamelia submits a claim to her property insurer. Within a few days, the insurer has put Kamelia in touch with a contractor and has cut a check to Kamelia to replace the equipment.

The contractor, owing to a lack of supplies in the devastated area, cannot begin work for two weeks. The cooler company cannot deliver new coolers for two weeks. Once work begins it will be another two weeks until operation can resume. Kamelia’s will be out of business for one month.

Kamelia must make her rent and utilities payment because these payments do not stop because of disaster. To keep her wholesale contract, Kamelia must place a minimum order with her supplier. Kamelia’s is still incurring RM 300 per day in expenses. Kamelia cannot sell any flowers. Kamelia’s will still have RM 9,000 in expenses for the month and no income for that month out of operation. Put in terms of profits, it will take Kamelia’s two to three months of profit just to zero out the loss in expenses.

It is even grimmer if Kamelia depended on the RM 4500-5,000 of profit as her sole source of personal income. Kamelia still must pay personal expenses  with no income. Can Kamelia even survive the three months to cover this one month of lost income.