In this regular feature we take a look at common clauses found in Energy Insurance that are often not well understood and try to look at what their intentions are, and what they cover or exclude.
In this article we look at 72-hour clauses/occurrence definitions. We have provided a general overview from our experience and encourage you to read the terms and conditions of your particular policy.
Insurance policies typically require there to be an ‘Occurrence’ to trigger a loss under the policy. The policy limit and the policy deductible or retention will also normally be referenced as ‘per Occurrence’ or ‘each Occurrence’ (although in some policies it can be aggregated over the policy period).
In the event that a covered event may result in a number of individual losses it is important that the policy is clear and unambiguous as to how the limit, deductible or retention applies to those individual losses. Therefore policies will usually contain a definition of the word ‘Occurrence’ and that definition will normally include, within the definition itself or as a separate clause, a ’72-hour’ provision.
A typical Occurrence definition will state that “the term ‘Occurrence,’ wherever used, shall mean one loss, accident, disaster or casualty or series of losses, accidents, disasters or casualties arising out of one event.”
However where weather related events (such as windstorms) occur over a period of time causing several losses, it is often not possible to determine whether damage caused was from one event or from multiple events. Therefore a 72 hour clause will allow the aggregating of all losses within a 72-hour period commencing during the policy period that arise from “windstorm, all tornadoes, cyclones, hurricanes, similar storms and systems of winds of a violent and destructive nature, arising out of the same atmospheric disturbance” to be treated as one event.
Similarly, an earthquake or volcanic eruption can result in several separate earthquakes or eruptions where it may not be clear whether damage was caused by one of the quakes or eruption, or by two or more quakes or eruptions. Again, there will usually be a 72 hour clause that aggregates all losses arising from more than one earthquake, shock or volcanic eruption within a 72-hour period commencing during the policy period to be treated as one event.
Whilst the 72-hour provision is normally limited to Windstorms and Earthquake/ Volcanic eruptions, some policy wordings will also include the perils of Hail, Strikes, Riots & Civil Commotions; Flood or Storm Surge.