Local authority clause under IAR policy


Under IAR policies there is an important exclusion no. 1.1 in BI section of the policy which says that no BI loss is payable if it is  caused due to any restrictions imposed by public authority in respect of reconstruction or continuing plant operations following an indemnifiable loss. 
It is observed that few clients / brokers are demanding Local authority clause extension under BI section of IAR policy to avoid application of above exclusion in the event of claim.
First of all please understand that there is no provision of local authorities clause under IAR policy.
However, if this clause is allowed in IAR policy having sum insured above 2500 crores, it would not help in deletion of exclusion number 1.1 of BI section of the policy because Local authority clause is applicable to MD section of policy which says that at the time of restatement of damaged property if insured is required to incur additional expenses in compliance to local authority norms, such additional expenses shall be taken into consideration while making payment of claim provided the total reinstated cost does not exceed the sum insured stated in policy.


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