An industrial firm has a factory building and machinery valued at 100 crore rupees. They purchased a Standard Fire and Special Perils policy with a sum insured of 70 crore rupees (under-insurance). A fire destroys a section of the warehouse, and an independent surveyor assesses the actual physical loss at 20 crore rupees. Additionally, the firm suffers a loss of income worth 5 crore rupees due to a two-month shutdown, but holds no 'Consequential Loss' add-on. Based on the Principle of Indemnity and the Average Clause, what is the final claim amount that the insurer is legally obligated to pay?

Question

Accepted Answer

14 crore rupees for the fire loss and zero for the loss of income

Answer

70 crore rupees because the total loss exceeded the under-insurance threshold

Answer

20 crore rupees for the fire loss and zero for the loss of income

Answer

20 crore rupees for the fire loss and 5 crore for the loss of income

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