Q2. A ladies fashion retail company, consisting of a large chain of shops, situated mainly in shopping malls, suffers a fire in its main supply warehouse. A large amount of stock clothing and fashion accessories-is destroyed. Some stock is smoke damaged, but some is saved. There is damage to the building and some plant- the modern automated racking systems.

At the time of the fire the insurance cover was as follows:

Item Description Sum insured (GHC) Basis of cover

1. Building including fixtures & fittings 2,150,000 Reinstatement

2. Machinery and all other contents 1,250,000 Reinstatement

3. Stock 2,000,000 Indemnity

4. Business interruption, gross profit (annual) 9,000,000 Declaration linked

Maximum indemnity period: Twelve months

Turnover in the nearest financial year was 15,000,000.

The amount claimed is as follows:

Material Damage: GHC

Buildings- repair: 750,000

Machinery repair and replacement: 650,000

Office contents: 45,000

Stock : 950,000

Architects and surveyors fees: 35,000

Business Interruption:

Reduction in turnover this is for a period of three months: 3,750,000

Savings: 150,000

Increased cost of working (economic): 50,000

The insured discovers that he has accidentally underinsured Item 2. This should have a replacement cost of GHC1, 400,000.

Excess under the policy:

Material damage: 5% of claim (loss) amount or minimum GHC 50,000

Liability has been established under the policy.

a.) Outline five enquiries you would make concerning this claim [5 marks]

b.) Calculate the total Material Damage (MD) claim [5 marks]

c.) Calculate the total Business Interruption (BI) loss [5 marks]

d. Write short notes on the following:

i. Professional Indemnity Insurance [4 marks]

ii. Bid bond [2 marks]

iii. Performance bond [2 marks]

iv. Advance mobilization bond [2 marks]