Summary of Arbitral Award 142820 (September 9, 2024)
An arbitration tribunal of the Bogota’s Chamber of Commerce resolved a dispute between an insured company (policyholder) and an insurer under a all-risk insurance policy. The dispute centered on (i) the statute of limitations for claims under the insurance, (ii) whether the loss of profit (LOP) coverage for machinery breakdown included the “stock accumulation” clause and its scope, and (iii) whether expenses for hiring a second expert to quantify the claim were recoverable under the policy’s auditor and accountant fees coverage.
1. Statute of Limitations
The tribunal determined that the applicable statute of limitations for the case was the standard term for property insurance, as per Article 1081 of the Colombian Commercial Code. It concluded that the claim was deemed timely, considering the suspension of terms during the COVID-19 pandemic.
2. On the Systematic Interpretation of the Insurance Policy, its Coverages, and Exclusions
The Tribunal found that the general conditions of the insurance policy did not mention the “stock accumulation” coverage for loss of profits due to machinery breakdown. However, it was included in relation to loss of profits for general material damage events.
Upon analyzing the policy’s particular conditions, the tribunal identified a reference to “stock accumulation” coverage within the section dedicated to loss of profits from machinery breakdown, although its operation was not explicitly defined.
Consequently, the tribunal (i) gave precedence to the particular conditions of the insurance policy over the general ones and (ii) conducted a systematic interpretation of the policy, applying the definition of “stock accumulation” coverage from the loss of profits clause for general material damage events to the machinery breakdown coverage.
Scope of the “Stock Accumulation” Clause
After establishing that the loss of profits coverage for machinery breakdown included “stock accumulation” coverage, the tribunal clarified its scope. It ruled that the clause did not pertain to the loss of stock due to the incident or the inability to sell it. Instead, it referred to the absence of a decrease in sales resulting from the insured’s ability to sell inventory accumulated prior to the incident.
As a result, for the calculation of gross profit loss due to the interruption of business, the income received by the insured from the sale of stock accumulated before the incident should not be considered.
3. Auditor and Accountant Fees
The insured sought reimbursement for expenses incurred in hiring a second expert to quantify the claim. The tribunal rejected this request, ruling that the policy’s coverage for auditor and accountant fees only applies to certification of general accounting or business information. Costs related to fulfilling the insured’s legal obligation to prove the claim’s value, as required by Article 1077 of the Colombian Commercial Code, were deemed outside the scope of this coverage.
4. Interest for Delayed Payment
The tribunal ordered the insurer to pay interest for delayed indemnity payments, calculated from the day following the judicial notification of the claim’s acceptance. This decision aligns with Article 1080 of the Colombian Commercial Code, which mandates interest for delays when the incident is proven but the quantum is determined during legal proceedings.
5. Outcome
The tribunal partially upheld the insured’s claims, ruling in favor of indemnity for loss of profit due to machinery breakdown, including the “stock accumulation” clause. However, it denied reimbursement for the second expert’s fees and ordered the insurer to pay interest for late payment of the indemnity.
This decision underscores the importance of detailed policy drafting and the interpretative weight of the particular conditions over the general terms in insurance contracts.
