DOS 1

BY D.KAUSHAL
DOS INSURANCE

( DETERIORATION OF STOCK INSURANCE )

INDEX:-

ITEM PAGE NO.

A BASIC COVER & FOES EXTENSION 2-3

B. CONDITIONS & EXCEPTIONS 4

C. WARRANTIES 5-6

D. SUM INSURED 7

E. CLAIM SETTLEMENT 8

F. PREMIUM RATES & PERIOD 9

G. DECLARATION FACILITY 9

H FOES EXTEN. CONDITIONS 10

I UNDERWRITING CONSIDERATIONS 10
 DOS 2

DOS INSURANCE

( DETERIORATION OF STOCK INSURANCE )

A.
BASIC COVER & FOES EXTENSION

POLICY TO COVER: Damage to "Stocks in Cold Storage" .

Hence DOS policy is also known as Stock Spoilage Policy

POLICY COVERS : Deterioration , Putrefaction or Contamination of stock

resulting from
rise in temperature in cold storage
due to
such breakdown of refrigeration machinery due to ‘Accident covered
under Machinery insurance policy’ ).

NOTE : 3 kinds of losses to stocks are covered viz. Deterioration ,

putrefaction or Contamination

Definition of Word ‘Accident’ above includes 2 types of losses :-

‘ACCIDENT’ : -
i ) damage to Machinery---(due to causes covered under MI policy )
&
ii ) Escape of Refrigerant--- (due to damage to m/c by causes
covered under MI policy )

but excluding damage to machinery due to –

i) failure of such parts requiring periodical renewal

( e.g. belts, gaskets ,packing material, Joints, )

ii) operation of fuses & kindred devices

 DOS 3

It is a "Consequential Since policy covers only such loss to stock which is in consequence of loss
Loss" policy to machinery under Machinery insurance policy .

i.e : first Breakdown of refrigeration machinery in cold storage

- which causes
rise in Temperature in cold storage
& which further causes
Deterioration of stock.

a Condition precedent Claim under DOS policy ( for loss to stock ) payable only if first claim
under MI policy is admissible.
( i.e. Precondition )
( just like relation between a) F (LOP) & FIRE(Material damage) policy
or between b) M (LOP ) & MI policy.

2 KINDS OF DOS a) DOS (POTATO ) – Covers stock of Potatoes .

POLICIES :
b) DOS (OTP ) - Covers stock of Other than Potato ( OTP )
like- fish , meat , prawn , fruits, dairy products etc.

BASIC COVER Basic cover is : Loss to stock consequent upon loss to accidental breakdown
& of refrigeration machinery at cold storage premises.
EXTENSION
( FOES ) But there is also possibility that – there is breakdown of machinery at
local electricity supply place ( not at cold storage )– which leads to failure
of Electricity supply to cold storage & this further causes non-operation of
refrigeration M/C in cold storage , which results in rise in temperature &
consequent damage of stock,

This above peril is - FOES ( Failure Of Electricity Supply )

Failure of electrical supply at terminal end ( in cold storage premises ) has

to be due to breakdown of machinery at local electric supply place.

This FOES peril can be covered as an Extension to basic cover.

Note: Premium rate without FOES extension is less

& with FOES extension is higher

B. CONDITIONS & EXCEPTIONS

 DOS 4

CONDITIONS : a ) Unqualified permission to operate cold storage –from LicenseAuthority

& in writing .
( Some conditions
b ) stock to be inside Refrigeration chambers - at time of loss.
before liability under
DOS policy ) :-
c ) First claim admissibility under MI policy.

d ) Stock Book - with daily details of stocks for each refrigeration

chamber.

e ) Log Book - entries of readings of Temperature & Relative Humidity

EXCEPTIONS :- i ) Excess ,
( MAIN ONES )
ii ) Franchise

Damage to stocks due to :-

iii ) Rise or Fall in Temperature for less than 24 Hours

iv ) Rise or Fall in Temperature due to FOES ( if extension not taken )

v ) Rise or Fall in Temperature due to stop of M/C during its repair etc.

vi ) Fire, Lightining , collapse of building , AOG perils ( flood, storm etc.)

vii) Overloading of machinery

viii) If temperature not exceeds 40 o F ( 4.4 o C )

ix ) Collapse of rack structure etc. ( unless it leads to m/c b/down

& resultant damage to stocks )

x ) Improper Storage / insufficient Air circulation

xi) Natural deterioration / putrefaction

xii) Inherent vice

xiii) Willful act

xiv) War etc. ; Nuclear perils

 DOS 5

C.
WARRANTIES

THIS POLICY HAS MANY IMP. WARRANTIES :-

WARRANTY DESCRIPTION
( In Short )

After 15th April Not to accept stock after 15th April ( without Co’s written permission )

No Unfit Stock Not to store stock unfit for storage

Stock Storage Only in prescribed manner ( for Air circulation & efficient distribution )

Thermometer ( dry & In each chamber & on all floors

wet bulb )

Pre-Cooling Pre-cooling for 24 Hrs. of Stock before its loading into chambers
before Loading

‘Temperature’ a) not above 34o F (1.1o C ) - before Loading of stock starts

( care to be taken b) not above 50o F ( 10 o C ) - during Loading
regarding temperatures ) c) not above 40o F ( 4.4o C ) - during Storage

[ Note : - For a liability , temp. must be above 40 o ( 4.4o C ) ]

( Remember above 3 temperatures )

5oC Variation Insured should ensure that variation of temp. inside chambers is
Max. + or - 5oC .

Cleaning & Of shelf / floors, if having deteriorated stock

Disinfecting

Forfeit of Benefits If anytime, on inspection & on testing by Agricultural Authority stored

under Policy stock is found to be infected or diseased, benefits under policy cease.
 DOS 6

WARRANTY DESCRIPTION

Notifying company About abnormal operating condition or stoppage of M/C causing

Temperature changes

Spare Parts To keep regular stock for Spare parts for : Compressor ,
Diffuser ,
Diffuser motors ,
Expansion valves .

( NOTE :- In case of lack of spare parts , some Franchise becomes

applicable )

In case of a ) to put into use all refrigeration unit during power supply times to
Power supply ensure Temperature does not exceed 40o F ( 4.4o C )
Cuts / curtails b ) No loading / Unloading Of stock during plant shut down
c) Install Booster Transformer , if low voltage conditions prevail
d ) maintenance of electrical installations.

Remember :-
Various ‘Temperatures’values like - 34o F (1.1o C ), 50o F ( 10 o C ), 40o F ( 4.4o C )

& especially 40o F ( 4.4o C ) since claim is payable only if temp.is above 40o F ( 4.4o C ).

D. SUM INSURED : -
 DOS 7

Provisions regarding - S.I. should represent MaximumValue of Stock in cold storage at any
SUM INSURED :- one time .
Formula for calculating S.I. ( i.e. Value of stock ) :-

= Value of Stock ( at time of loading )

= Capacity X ( price + storage charges )

i.e. Full Storage Capacity ( of cold storage in its all chambers )

X
( Average price of potatoes at time of loading
+ Storage Charges for Whole Season )

‘FULL STORAGE :- its calculation is on the basis that :- 10 Quintals potatoes can be stored
CAPACITY’ in 100 cubic feet space inside chambers

S.I. ILLUSTRATION:- Suppose : -

Total space in all chambers : 50,000 cub. Feet
Storage charges for whole season : Rs. 100 per quintal
Avg. potato price at time of loading : Rs. 800 per quintal

Now to find Full Storage Capacity : -

Given, Qty. of potatoes in 100 cub.ft. = 10 quintals

Hence, - do - in 50,000 cub.ft. = 10 qtl____ X 50,000 cub.ft.

100 cub.ft

Full Storage Capacity = 5,000 quintal

is Full Storage Capacity

Hence , S.I. = Full Storage Capacity X ( Average price per quintal

+ Storage charges per quintal )

= 5000 qtl. X ( Rs.800 + Rs.100 )

= Rs. 45,00,000

NOTES : - a) Avg. price of potato is determined by Insured with concurrence of

company at the time of taking insurance ( i.e. mutually agreed price )

b) Stock in All chambers ( i.e.No partial insurance for selected chambers )

c) Storage charges for Whole season to be taken

E.
PROVISIONS FOR ‘ CLAIM SETTLEMENT ’
 DOS 8

Provisions regarding Claim settlement like for Indemnity , Shrinkage ,

Rottage & Under-insurance are as follows : -
BASIS OF
INDEMNITY :- On basis of Insured value or Market value whichever less .

DEDUCTIONS :- Following Deductions to be made from each claim :-

i ) for Shrinkage & Rottage

ii ) Under – insurance ( if any ) - pro-rata condition of Average .
iii ) Excess
a ) Deduction for Same %age as in insured’s contract with his hirers ( for shrinkage % ) .
SHRINKAGE : - but minimum 5 % of insured value of damaged stock ( i.e higher of two )

b ) Deduction for always 5 % of insured value of damaged stock (irrespective of contract

ROTTAGE: - with hirer for rottage % ))

EXCESS :- Different Excess for policy with FOES & without FOES :-

10 % of Claim amount but minimum Rs. 20,000

a) WITHOUT ‘ FOES’

b) WITH ‘ FOES ’
20 % of Claim amount but minimum Rs. 20,000
EXTENSION
( i.e. minimum amount is same i.e. 20,000
but % is different – 10 % or 20 % )

for Amount ( Rs. )

B ) DEDUCTIBLE
Compressors 1000 /-
FRANCHISE for some
Diffuser 750 /-
M/Cs.
Diffuser motors 750 /-
Expansion valves 500 /-

( This deductible franchise is in addition to some franchise applicable in

case these machines do not have spare parts as per warranty requirement )

F. PREMIUM RATES & PERIOD

 DOS 9

RATE :- Rate is on per month basis ( i.e. not annual rate % )

WITHOUT ‘ FOES’ : Rs. 0.10 % per month or part thereof

WITH ‘ FOES ’ : Rs. 0.12 % per month or part thereof

EXTENSION

MINIMUM PERIOD 7 Months .

FOR DOS POLICY :- The Premium Rates are in % per month ( e.g. 0.10 % per month ).

Hence, even if period is less than 7 months , full rate of 7 Months will be
applicable
e.g. :-
if period is 8 months , total rate = 8 x 0.10 % = 0.80 %
if period is 7 months ,total rate = 7 x 0.10 % = 0.70 %

if period is 6 months , total rate = 7 x 0.10 % = 0.70 %

( & not 6 X 0.10 % since minimum. rate
is for 7 months )

DECLARATION Permissible provided : -

FACILITY
a) Period for 12 months ( & not lesser )
b) Minimum S.I. ; Rs 50 lac
c) Monthly premium on value of ‘Max.. Stock on a day during month’
d) Fortnight declarations ( if not submitted – forfeiting of declaration
facility without refund )
e) Premium adjustment ( max. refund – 40 % )
 DOS 10

H a) Minimum 16 Hrs. per day power supply

b) 100% capacity to run cold storage thro’ D.G.set ( oil engine )
‘FOES EXTENSION’
IMPORTANT c) In case of a claim-to obtain ‘CLEAR LETTER’ from power supply
CONDITIONS :- authority about - cause of supply failure,
times ( switch off & switch on )
& duration of interruption of power

SOME UNDERWRITING CONSIDERATIONS :-

Some imp. U/W considerations are as follows :-

1. MI policy to be in force

2. All machinery in cold storage to covered

3. Pre-acceptace inspection ( for both MI & DOS policies )

4. D.G. set of adequate capacity – to be there in cold storage

5. All Chambers of cold storage to be covered ( i.e. no selection of chambers ).

6. For FOES extension - ensure about continuous power supply of min. 16 Hrs. per day

NOTE : -In case one finds any corrections or some other imp. additional points to

be made in the above write up , pl. let me know about the same.

( DINESH KAUSHAL ) –
MOBILE : 9911127499