Complete information on Standard Form Policy Conditions – Fire Insurance

Complete information on Standard Form Policy Conditions – Fire Insurance

The fire insurance may be defined as a contract by which the insurer agrees to make good any loss suffered by the insured through damage or destruction of properties by fire up to the sum assured in consideration of payment called premium. The contract of fire insurance is expressed in a document described as a policy.

It provides for the payment of a sum of money as representing the pecuniary loss incurred by the insured through the damage or destruction by fire of the property described in the policy or alternatively the restoration or replacement of what has been damaged or destroyed. Only Standard Fire and Special Perils Policy with the permitted “Add on” covers can be issued.

The conditions in fire insurance may be of varied nature, but the standard form of policy includes several conditions which are common to most of the fire policies.

The fire insurance contract, principle and practice are governed by the conditions contained in the policy. The standard form of policy at present is the outcome of several vicissitudes in the past.

In the beginning, the conditions were very few but with the advancement of the fire insurance several conditions were introduced. Now the conditions became very complex and varied. Now, therefore, several conditions are deleted from the policy and sometimes, the policy is called ‘condition less policy’ although no policy can be condition less at a time.

Needs have arisen about the common conditions of the policy. The leading insurers agreed on a code of essential conditions which are embodied in the standard form of policy. The standard form of policy is now commonly used by the fire insurers.

According to standard form the condition of fire- policies are divided into two parts: (i) informative and (ii) proper conditions.

The informative conditions are also divided into two parts: (i) Preamble and (ii) Perils insured.

Specimen of Fire Policy:

“In consideration of the insured named in the schedule hereto having paid to the insurance company limited (hereinafter called the company) the full premium mentioned in the said schedule, the company agrees (subject to the conditions and exclusions contained herein or endorsed or other­wise expressed here on) that if after payment of the premium.

The property insured described in the said schedule or any part of such property be destroyed or damaged by any of the perils specified hereunder during the period of insurance named in the said schedule or of any subsequent period in respect of which the insured shall have paid and the company shall have accepted the premium re­quired for the renewal of the policy.

The Company shall pay to the insured the value of the property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof.

British Law :

British Law is the guideline for fire insurance

1. There must be an actual fire or ignition, hence a more heating or fermentation will not be sufficient to render the insurers liable for loss occasioned thereby.

2. There must be something on fire which ought not to have been on fire.

3. There must be something in the nature of casualty or accident but a fire occasioned by the willful act of a third person, without the private or consent of the assured is to be regarded as accidental for purpose of this rule.

Any loss attributable to the fire, whether by actual burning or by scorching or cracking or by smoke or otherwise is within the contract.

The important ingredients in the definition are

(a)ignition

(b)Accidental

Ignition :

The fire should be actual. Ignition means the presence of flames. Mere damage by smoke heating, scorching or charring without actual burning is not considered a fire. Damage caused by acid is not fire damage. Chemical burring is not burning by fire.

Accident :

The ignition has to be fortuitous or accidental. This applies to the insured. If a third party deliberately sets fire to insured property, it is also accidental so far as the insured is concerned provided the third party is not acting with connivance of the insured.

A fire caused by the negligence of the insured or of his employees will be payable so long as there is no element of fraud.

A fire lighted for a definite purpose and confined to its own property limits e.g. cooking, heating or manufacturing purpose is not a fire within the meaning of the Policy. Destruction of lighted lamp by its own fire does not come within the fire policy. However, fire caught by the side of the lamp is within the fire policy. There is improper or accidental ignition.

Once there is a fire within the meaning of fire policy, the damage caused by smoke and heat, scorching, falling walls, collapse of roofs, floors, etc. is also covered within the fire insurance.

Dam­age caused deliverable or accidently by fire brigades in discharged of duties are also covered. For example damage caused by water or extinguishing agents or blowing up the property to prevent spread of fire.

Contents of policy:

1. Name and address of the insured

2. Policy numbers the agent’s code no.

3. Name and address to the policy issuing office

4. Property covered / sum assigned

5. Property owner, location, independent or peril of some buildings

6. The occupation of the premises

7. The occupation of the premises by other

8. The construction of building

9. General and special warranties

10. Rate of tariff

11. Endorsements

Preamble of the Policy :

The preamble of the policy sets forth the agreement between the insurers and the insured subject to the conditions of the policy. Payment of premium is an essential consideration of the contract.

The insurer, therefore, undertakes to pay to the insured the value of loss to the property at the time of its destruction or the amount of the damage done or to reinstate or replace the property or any part thereof.

The agreement clause sets forth that the insurer’s liability shall not exceed the sum set opposite each item.

The second clause of the preamble provides for the conditions and terms of the renewal of the policy which limits the liability of the insurer to any term in respect of which the insured shall have paid and the insurer shall have accepted the premium in renewal of the policy.

The third part contains the schedule where the name of the insured, the property insured, sum assured, the total sum assured, period of insurance and premium amount are mentioned.

Perils Insured :

The next important part of the policy is description of the perils insured. The perils insured under the standard form of policy are described below.

1. Fire :

Fire (whether resulting from explosion or otherwise) is not occasioned by or happening through:

(a) Its own spontaneous fermentation or heating or its undergoing any process involving the application of heat,

(b) Earthquakes, subterranean fire, riot, civil commotion, war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection or military or insured power.

To constitute fire within the meaning of contract of fire insurance two essentials must be present, viz., (1) there must be ignition and (2) the fire, so far as the insured is concerned, must be fortuitous in origin. The ‘fire’ must be understood in its popular sense; it does not include chemical actions which result in no ignition.

The term ‘fire’ does not include a fire lighted for a specific purpose while confined to its limits. Fire used for cooking, warming or manufacturing is not a fire within the meaning of the contract because there is nothing fortuitous about it.

Any loss occasioned by such a fire, whether by burning of any property in the fire itself, or by the scorching or cracking of any property adjacent to it owing to its intense heat, if unaccompanied by origin, is not covered by the contract since the cause of the loss cannot be regarded as a peril insured against.

However, if the fire causes ignition by throwing out sparks or otherwise, outside its proper limits it will be fire in the sense of fire insurance.

The fire thus occurred, being fortuitous in its origin, is a fire within the meaning of the contract and any loss occasioned thereby, whether by direct building, or by scorching or cracking, or by smoke is within the meaning of fire insurance.

The assured must show that he has sustained a loss by fire within the meaning of the fire insurance. The fire caused deliberately by insured or at his convenience will not be included in the meaning of’ fire’. However, the fire caused by incendiaries without the knowledge or connivance of the insured will be included under fire insurance.

The following forms of loss or also indemnified provided they are proximately caused by fire since.

(i) damage caused during or immediately following fire by smoke, scorching and falling walls or part of the building in which fire takes place, (ii) damage caused by firemen and others in the discharge of their duties by using water or other extinguishing agent, demolition of buildings to prevent spreading of fire, and damaging property so as to gain access to fire, (iii) damage to property immediately after removal from burning building caused by exposure to weather, provided the removal was justified.

2. Lightning :

The lightning may be a form of fire, but loss occasioned by lightning without ignition is not a loss by fire; where the lightning results in ignition, a loss occasioned by such ignition is a loss by fire. However, in practice any damage caused by lightning whether ignition results or not is covered under fire insurance.

3. Explosion/Implosion:

Explosion is when the atmospheric pressure in lower than the pressure in the vessel and therefore the vessel bursts open under the pressure generated within it. Implosion is when the atmosphere pressure is greater than the pressure in the vessel and, therefore the vessel is pressed in and damaged by outside pressure.

The explosion of gas used for illuminating and domestic purposes in a building in which gas is not generated and which does not form part of gas works will be insured under fire insurance.