Fire at a hair salon: an actual cash value dispute almost halved the payout

The situation

A hair salon with two locations in the Utrecht region was struck early one morning by a fire that originated in the pantry next to the treatment area. The fire brigade prevented the flames from spreading to the dwelling above, but the treatment area itself and a large part of the shop fit-out were heavily damaged by smoke, soot and extinguishing water. The wash units, hairdressing chairs, drying hoods, the stock of hair-care products and the till system had all become unusable.

The entrepreneur had a standard commercial insurance policy with cover for contents, stock and business interruption. The salon had been running at the same location for more than fifteen years. Part of the contents had been acquired at the outset, another part had been replaced over the years.

The insurer’s initial response

The insurer’s appointed expert attended within a week and drew up a loss report. In that report the damage to the contents was valued at approximately EUR 42,000. Central to the calculation was a heavy depreciation on the basis of age: for the older hairdressing chairs and drying hoods, an actual cash value of around 15 per cent of the replacement value was applied, despite the fact that they were in good condition and functioned without issue.

The entrepreneur did not recognise herself in this valuation. She had had the fit-out thoroughly refurbished over the previous years, with new upholstery on the chairs and renewed technical parts in the wash units. When she queried this, she was referred to the policy conditions, in which a distinction is drawn between replacement value and actual cash value compensation where items are more than ten years old.

Our role

Krantz & Polak Resolve was engaged as the counter-expert. On our first visit we surveyed the damage in detail, including photographs of the refurbished components and purchase receipts for refurbishment work from the previous five years. We then commissioned an independent valuation by a specialist in salon contents.

On that basis we were able to substantiate that the actual usage value of a large part of the contents was significantly higher than the standard depreciation assumed. In addition, careful reading of the policy revealed that the ten-year clause applied only to specifically named categories, and not to the refurbished chairs, which, under the contract, could be classified as “renewed”.

After two rounds of negotiation with the insurer’s expert and an additional technical discussion, a new valuation was agreed. In parallel we revised the business interruption calculation on the basis of the actual turnover figures for the previous three years, rather than the projected figures the insurer had used.

The outcome

The final payout came in at approximately EUR 89,000: more than EUR 47,000 more than the original offer. A significant part of that increase was attributable to a fairer valuation of the contents (around EUR 32,000 extra), the remainder to the corrected business interruption item and to compensation for the temporary rental of a replacement workspace during refurbishment.

The salon was able to reopen within three months, with largely new fit-out. For the entrepreneur this meant not only a financial difference, but also the possibility of restarting without resorting to a substantial loan.