The insurers retained MDD to review and comment on the business interruption claim.
To mitigate the loss, the insured adjusted the mix of mill feed by utilizing high-grade ore. As a result, they stock-piled unused lower-grade ore for later use. The claim included an adjustment to exclude this higher-grade ore to normalize the ore feed based on historical results.
The insurance policy contained a clause that, in part, stated: “Should the Insured’s actual production following the loss during the interruption period involve the processing of higher-grade ore than would otherwise have been processed absent the loss, the business interruption loss calculation will take into account the actual ore processed using the average ore grade that would have been processed absent the loss.”
This clause removed any ambiguity about how to treat the processed higher-grade ore in the loss calculation during the loss period. As a result, MDD adjusted the actual results to assume the normal average ore grade processed during the loss period instead of the higher-grade ore processed.
To project the normal grade that would have been achieved had the incident not happened, MDD held on-site conversations with the insured’s personnel and performed a detailed review of mine plans, forecasts, and results, along with a further review of milling operations records.
The policy language meant that mitigating efforts should not be considered as part of the loss calculation, which resulted in a multi-million dollar adjustment for the insured.