CASE 1 - Kamelia’s Flower Shop

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.