What Should Foreign Companies Do When an Insurer Disputes the Value of Damaged Inventory in Turkey? (2026 Updated Guide)

What can a foreign company do when a Turkish insurer undervalues damaged inventory? Learn how stock value, purchase cost, replacement cost, salvage, underinsurance, expert reports and insurance disputes should be handled in Turkey.

When a warehouse, factory, retail facility or logistics center in Turkey suffers fire, flood, water damage, machinery failure or another insured event, disagreement may arise not over whether inventory was damaged but over how much the damaged stock was actually worth. For foreign-owned companies, the difference can be substantial. The insurer may rely on purchase cost, accounting records, depreciation, salvage value or an expert assessment, while the insured company may argue that the goods have a much higher replacement or insured value. The correct response is to reconstruct the inventory position as of the loss date, analyze the valuation provisions in the insurance policy and challenge unsupported deductions with accounting, commercial and technical evidence.

Why Do Insurers Dispute Inventory Value?

Inventory claims can involve thousands of separate products, raw materials or finished goods. After a major loss, the insurer may question the quantity of goods allegedly present, unit values, ownership, purchase prices, stock movements immediately before the event, damaged-versus-undamaged quantities, recoverable salvage and whether the policy’s valuation method supports the amount claimed.

The dispute therefore frequently becomes both an insurance-law and forensic-accounting problem.

Start With the Insurance Policy

Before calculating the loss, determine how the policy defines insured property and how stock losses are valued.

The company should review the policy schedule, general and special conditions, endorsements, limits, deductibles, exclusions, valuation provisions and any clauses dealing specifically with raw materials, work in progress or finished goods.

Purchase Price Is Not Always the Entire Issue

A company’s accounting purchase cost and its insurance recovery are not necessarily identical concepts. The applicable policy wording and nature of the stock must be examined.

For imported inventory, freight, customs-related costs and other expenses may also affect the commercial cost structure, depending on the policy and circumstances.

Reconstruct the Stock on the Date of Loss

One of the first questions will be: What inventory was actually present when the insured event occurred?

The company should preserve ERP records, warehouse ledgers, inventory lists, purchase invoices, delivery records, sales invoices, customs declarations and stock-transfer documents.

Physical Inventory Records Are Critical

If the company performed regular physical stock counts, preserve the most recent count preceding the loss.

The insurer may compare physical-count records with accounting inventory to identify unexplained differences.

Preserve ERP Data Immediately

Do not rely only on printed spreadsheets prepared after the incident. Preserve the underlying electronic records showing historical stock movements.

Audit trails can help establish when inventory entered or left the warehouse.

Purchase Invoices Can Establish Unit Cost

Supplier invoices can be important evidence of acquisition cost, particularly for recently imported or purchased inventory.

Invoices should be matched to the specific products, quantities and batches affected by the loss.

Customs Records Can Support Imported Inventory Claims

For goods imported into Turkey, customs declarations, commercial invoices, packing lists and transportation documents can help demonstrate quantity, description and acquisition history.

Foreign companies should coordinate Turkish customs data with group-level purchasing records.

Related-Party Purchases Require Careful Documentation

A Turkish subsidiary may purchase inventory from its foreign parent or another group company. The insurer may scrutinize intercompany pricing, particularly where the claimed value significantly exceeds manufacturing or third-party market cost.

Transfer-pricing documentation and commercial explanations should therefore be preserved where relevant.

Replacement Cost May Be Significantly Higher

A company may have purchased inventory months before a fire at a lower price than the amount required to replace it after the loss.

Currency movements, commodity prices, freight rates and supplier price increases can create a substantial difference.

Whether replacement cost is recoverable depends on the policy terms and applicable insurance principles, so it should be demonstrated rather than assumed.

Foreign Currency Creates Additional Valuation Questions

Imported inventory may have been purchased in euros, dollars or another foreign currency.

The company should determine the relevant contractual and policy rules concerning currency conversion and avoid mixing exchange rates from different dates merely to maximize the claim.

Raw Materials and Finished Goods May Require Different Analysis

Raw materials may be valued differently from finished products that have already absorbed manufacturing costs.

Work in progress can be even more complicated because labor, energy and manufacturing overhead may already have been incurred.

The claim should therefore separate inventory categories.

Finished Goods Should Be Distinguished From Expected Profit

The retail or future sales price of a finished product should not automatically be assumed to equal the insured inventory loss.

The policy and applicable indemnity principles must be analyzed to determine which elements of value are recoverable.

Lost Profit May Belong Under Business Interruption Coverage

If damaged inventory prevents future sales, the company may also suffer loss of gross profit or another business-interruption loss.

That claim should be distinguished from the physical inventory claim to prevent duplication while ensuring that potentially covered business interruption losses are not overlooked.

The Insurer May Question Whether All Goods Were Damaged

After water, smoke, fire or chemical contamination, an insurer may argue that some stock remains usable.

The insured should therefore document the physical condition of each affected inventory category.

Obtain Photographs and Video

Create a systematic visual record before stock is moved, cleaned, sold as salvage or destroyed.

Images should identify warehouse areas, pallets, product labels, quantities and the type of damage where possible.

Do Not Destroy Inventory Prematurely

Damaged goods can be critical evidence.

Unless immediate disposal is required for safety or regulatory reasons, coordinate inspection and evidence preservation before destruction.

Where disposal cannot be delayed, document why and create a detailed evidentiary record.

Independent Expert Evidence May Be Necessary

The insurer’s appointed loss adjuster or expert does not prevent the insured company from obtaining its own technical or financial analysis where appropriate.

An independent expert can examine quantity, usability, contamination, repairability, replacement cost or other disputed issues.

Forensic Accounting Can Be Particularly Valuable

Large inventory claims may require reconstruction of stock through purchase, production, sales and warehouse records.

A forensic accounting analysis can help reconcile the claimed quantity with the company’s financial statements and ERP system.

Prepare a Stock Reconciliation

A useful calculation may begin with opening inventory, add purchases and production, subtract sales and transfers and reconcile the resulting amount with the inventory allegedly present on the date of loss.

Any unexplained difference should be investigated before the insurer identifies it.

Damaged Quantity and Damaged Value Are Separate Questions

First establish how many units were affected. Then establish the legally relevant value of those units.

Mixing these questions can make the claim unnecessarily difficult to audit.

Salvage Value Can Reduce the Claim

Some damaged goods may still have residual value. The insurer may seek to deduct salvage from the gross loss.

The company should verify whether the proposed salvage value is realistic and supported by actual market evidence.

Do Not Accept an Unsupported Salvage Deduction

If the insurer assumes that damaged stock can be sold for a substantial amount, request the factual basis.

Actual bids, salvage offers and disposal results can be more persuasive than theoretical percentages.

Contaminated Goods May Have No Commercially Realistic Salvage Value

Food, pharmaceutical, chemical, cosmetic or other sensitive inventory may become legally or commercially unusable after contamination.

Regulatory restrictions, quality requirements and brand-protection concerns should be documented where relevant.

Brand Reputation Can Affect Salvage Decisions

A manufacturer may reasonably resist selling seriously damaged branded goods into secondary markets if doing so creates product-safety or reputational risks.

The insurer and insured should address these issues before salvage occurs.

Underinsurance Can Become a Major Issue

The insurer may argue that the declared or insured value of inventory was lower than the actual value exposed to risk.

Depending on the policy structure and applicable provisions, underinsurance may affect the recoverable amount.

The calculation should be checked carefully rather than accepted automatically.

Check the Sum Insured

Compare the policy’s stock limit with actual inventory values immediately before the loss.

Seasonal businesses should pay particular attention to fluctuations in warehouse stock.

Review Declaration-Based Policies

Some commercial policies use periodic declarations or adjustable stock values.

Determine whether required declarations were submitted accurately and whether the insurer’s underinsurance argument reflects the actual contractual mechanism.

Multiple Locations Can Create Allocation Problems

A company may insure inventory across several warehouses or facilities.

Confirm whether limits apply separately to each location or collectively and whether the damaged stock was held at an insured location.

Goods Belonging to Third Parties Require Separate Review

Warehouses may contain consignment stock, customer goods or inventory owned by another group company.

Ownership and insurable interest should be established for each category rather than assuming that everything physically present belongs to the policyholder.

Goods in Transit May Fall Under Another Policy

If the loss occurred while stock was being transported or temporarily held during transit, determine whether the relevant coverage is property insurance, cargo insurance or another policy.

Overlapping policies should also be identified.

The Insurer’s Expert Report Should Be Examined Closely

If the insurer offers substantially less than the company claims, determine how the valuation was calculated.

Look for incorrect quantities, outdated unit costs, unsupported depreciation, incorrect salvage assumptions, omitted freight or customs costs and inconsistent currency conversion.

Request the Calculation Behind the Offer

A lump-sum settlement proposal should be broken down sufficiently for the company to understand the disputed items.

Without understanding the insurer’s methodology, meaningful negotiation is difficult.

Depreciation Should Not Be Applied Mechanically

Whether depreciation is appropriate depends on the nature of the goods, their condition, age, market and applicable policy terms.

Inventory should not automatically be treated like depreciating machinery or fixed assets.

Obsolete Stock Is Different

If inventory was already obsolete, expired, damaged or commercially unsaleable before the insured event, the insurer may legitimately question its claimed value.

The company should distinguish normal stock from slow-moving or obsolete items transparently.

Historical Sales Can Help Establish Commercial Reality

Sales before the loss can demonstrate whether inventory was actively marketable and at what commercial level.

This may be particularly useful where the insurer alleges that products had little value before the incident.

Replacement Purchases Are Strong Evidence

If the company actually replaces the damaged goods, new purchase invoices can demonstrate the real cost of restoring inventory.

The insurer should nevertheless be provided with a clear explanation of differences between original and replacement costs.

Currency Movements Should Be Documented

Where replacement cost increased because the Turkish lira moved against the purchasing currency, preserve exchange-rate and payment evidence relevant to the claim.

The applicable policy method still determines whether and how that increase affects indemnity.

Partial Payments Should Be Considered

Where liability for at least part of the claim is undisputed, the company may consider requesting payment of the undisputed amount while reserving its rights concerning the balance.

Any release or settlement document should be reviewed carefully before signature.

Be Careful With Settlement Releases

A payment described as “full and final settlement” may affect the company’s ability to pursue additional compensation.

Foreign company managers should not sign a release merely because immediate cash flow is needed.

Interest May Become Relevant

Where the insurer delays payment after the claim has become payable, interest issues may arise under the applicable insurance and commercial-law framework.

The timeline of notification, document requests, expert examination and insurer response should therefore be preserved.

Document Every Claim Submission

Maintain a chronology showing when the loss occurred, when the insurer was notified, which documents were requested, when they were provided and when offers or objections were received.

This can become important in a later dispute.

Repeated Document Requests Should Be Tracked

If the insurer repeatedly requests documents already provided, respond systematically and preserve proof of delivery.

The company should be able to demonstrate its cooperation with the claims process.

Do Not Inflate the Claim

A strong inventory claim should be conservative, traceable and auditable.

Unsupported quantities or exaggerated values can damage credibility across the entire claim.

Separate Undisputed and Disputed Inventory

Prepare a schedule identifying items accepted by both parties and items still disputed.

This can narrow the disagreement and facilitate partial payment.

Supplier Evidence Can Strengthen the Claim

Foreign suppliers may confirm historical purchase prices, replacement prices, manufacturing lead times and availability.

For group-company supplies, the evidence should be supported by genuine accounting records rather than a letter created solely for the insurance claim.

Consider Whether the Insurer’s Valuation Is Internally Inconsistent

An insurer should not, without proper justification, use one valuation methodology for determining underinsurance and a materially different methodology for calculating the insured loss.

The calculations should be compared carefully.

Business Interruption Must Be Coordinated With the Stock Claim

Physical stock loss and business interruption often overlap factually.

A coordinated claim should ensure that manufacturing disruption, inability to fulfill orders and lost gross profit are documented without seeking duplicate recovery for the same economic loss.

What If the Insurer Rejects the Company’s Valuation?

The company should respond with a structured written objection identifying each disputed assumption and supporting the alternative calculation with policy wording, invoices, accounting records and technical evidence.

General statements that the insurer’s offer is “too low” are unlikely to be sufficient.

Negotiation Should Be Evidence-Based

A settlement meeting is more effective when the company can present a reconciled stock schedule showing:

product identity; quantity; original unit cost; replacement cost where relevant; damage status; salvage value; and claimed amount.

Litigation or Insurance Dispute Proceedings May Become Necessary

If the valuation dispute cannot be resolved, the appropriate dispute-resolution route should be determined from the policy, applicable insurance framework and circumstances of the claim.

Procedural deadlines and limitation periods should be reviewed before negotiations become prolonged.

Preserve Evidence Even During Settlement Discussions

Do not discard damaged inventory, destroy accounting records or allow digital data to be overwritten merely because negotiations appear promising.

The claim may later require formal proof.

Review the Foreign Parent Company’s Role

If the Turkish policyholder belongs to an international corporate group, determine whether the parent company owns any stock, paid suppliers directly or maintains centralized procurement records.

Group documentation should be reconciled with the Turkish company’s books.

Immediate Action Plan

When an insurer disputes the value of damaged inventory in Turkey, the foreign company should immediately review the policy’s valuation provisions, preserve the damaged stock, secure ERP and accounting data, reconstruct inventory as of the loss date, collect purchase and customs records, separate raw materials, work in progress and finished goods, obtain independent technical or accounting evidence where necessary, test the insurer’s salvage and underinsurance calculations, document replacement costs, coordinate the property and business-interruption claims and protect all contractual and procedural deadlines.

Frequently Asked Questions

Can the insurer simply use the original purchase price?

Not necessarily. The applicable valuation method depends on the insurance contract, type of inventory and circumstances of the loss.

Can replacement cost be claimed?

Potentially, depending on the policy terms and applicable indemnity principles. Actual replacement invoices can provide important evidence.

Can customs duties and import expenses be included in inventory value?

They may be relevant to the actual cost of imported goods depending on the policy’s valuation mechanism and circumstances. The calculation should be supported with customs and accounting records.

What if the insurer says some damaged goods can still be sold?

The alleged salvage value should be supported by realistic evidence. Product-safety, regulatory and brand considerations may also affect whether damaged goods have genuine resale value.

Can the insurer reduce payment because the warehouse was underinsured?

Potentially, depending on the policy and applicable provisions. The insurer’s calculation should be independently checked.

Should damaged inventory be destroyed immediately?

Generally, evidence should first be preserved and inspection coordinated unless safety, regulatory or other urgent circumstances require immediate disposal.

Can a foreign company’s ERP records prove the amount of stock?

They can be important evidence, particularly when reconciled with physical counts, invoices, customs records, production data and financial accounts.

Can the company appoint its own expert?

Independent technical and forensic-accounting evidence can be valuable where the insurer’s valuation or damage assessment is disputed.

Can lost sales be included in the inventory claim?

Lost profits or gross-profit losses may fall under business-interruption coverage rather than the physical inventory claim. The two should be coordinated carefully.

What is the strongest response to an insurer’s low valuation?

Build an auditable inventory-loss calculation that connects each claimed quantity and unit value to contemporaneous warehouse, accounting, purchasing, customs and technical evidence, and challenge each deduction made by the insurer separately.

Client-Focused Legal Support for Inventory Insurance Claims in Turkey

Foreign-owned companies facing inventory losses in Turkey may encounter disputes involving stock quantities, replacement cost, foreign-currency purchases, underinsurance, salvage deductions, expert reports, business interruption and delayed or insufficient insurance payments. Fırat Fesih Kaya Law Office assists foreign companies, international investors and corporate policyholders in substantial commercial insurance disputes. Lawyer Fırat Fesih Kaya provides legal assistance in reviewing insurance policies and expert calculations, preparing objections to undervalued inventory claims, coordinating technical and financial evidence, negotiating disputed insurance payments and pursuing available legal remedies where the insurer does not pay the recoverable loss.

Phone:
+90 312 434 22 22

Mobile:
+90 532 769 22 22

Email:
info@firatfesihkaya.av.tr

Address:
Mevlana Boulevard No:221, Yıldırım Tower, Office No:148
06520 Balgat, Çankaya, Ankara, Turkey