When a person seeks insurance protection, he enters into a contract to insure him against property loss or damage by fire, lightening, explosion, or other incidental events. This contract is principally a contract, and is therefore governed by the general laws of contract. It does have some special features that are common in insurance transactions such as utmost confidence, indemnity and subrogation, contribution, as well as the ability to pay an indemnity, contribution, indemnity, or subrogation. These principles are common to all insurance contracts, and are governed under special principles of law.
FIRE INSURANCE
S. 2(6A) defines “fire insurance business” as the business of executing, other than incidentally, insurance contracts against loss by or incidental fire or any other occurrence that is customarily included in the fire insurance business’s risks.
Halsbury explains that it is an insurance contract in which the insurer agrees to protect the insured against any loss or damage caused by fire, lightning, explosion, or other causes. This policy covers property and other items against damage caused by fire.
A fire insurance contract, in its strictest sense, is one.
1. Insurance against fire loss and damage is the principal object of this insurance policy.
2. The amount of the insurance policy’s liability is limited by the amount of the assured, and not necessarily the amount of damage or loss sustained by the insured.
3. Apart from the contractual liability, the insurer has no interest in the destruction or safety of insured property.
LAW GOVERNING FIRE INSURED
Fire insurance is not governed by a statutory statute. This is unlike marine insurance, which is regulated under the Indian Marine Insurance Act 1963. The General Insurance Business (Nationalization) Act (1872) also addresses the issue. Indian courts have relied on the judicial opinions and decisions of English jurists in dealing with fire insurance.
To determine the value or property that was damaged by fire, for indemnity purposes under a policy on fire insurance, it was the value to the insured which was to be determined. The market value of the property prior to and after the loss was used as a reference. This method of assessing value was not applicable in cases when the market value was not representative of the actual value of the property to an insured. For example, if the property was used as a residence or for business purposes. In these cases, the cost of reinstatement is the measure of indemnity. Lucas v. New Zealand Insurance Co. Ltd. [1] was an example of such a case. The insured property was bought and used as an income-producing asset. Therefore, the court determined that the correct measure of indemnity to cover property damage by fire was the cost for reinstatement.
INSURABLE INTEREST
An insurable interest is a person who is so invested in a property that they have both the benefit of its existence and the prejudice caused by its destruction. This person can insure the property against damage from fire.
At the inception and at the loss, the interest in the property must be present. It must exist at the beginning of the contract. If it doesn’t exist at the time it is lost, the insured will not be liable for any loss. If he sells the insured property, and it is later damaged by fire, he does not suffer any loss.
FIRE INSURANCE POLICY – RISKS GUARDED
The date of insurance contract is the issuance of the policy. It is not the same as the acceptance or assumption risk. Section 64-VB states that an insurer cannot assume risk before receiving premiums. Rule 58 of 1939 Insurance Rules speaks of advance payments of premiums. Section 64 VB allows the insurer to take over the risk starting at the date. The proposer could negotiate with the insurer about a specific date if they did not want it. The Apex Court has stated that final acceptance of insurance is the one of the insured or the insurer. This decision depends on how negotiations have progressed. Although the Fire Insurance Policy appears to have covered the following risks, they are not fully covered by the Policy. These are some of the contentious areas:
FIRE: Property that is damaged or destroyed by natural heating, spontaneous combustion, or own fermentation cannot be considered fire damage. Paints and chemicals that are used in heat-treated factories, which can be damaged by fire, are not covered. The coverage does not cover property that has been declared insolvent by any Public Authority.
LIGHTNING: Lightning can cause fire damage and other types of damage such as roof damage from a falling chimney struck with lightning, or cracks in buildings due to lightning strikes. The policy covers lightning-related damages as well as fire.
AIRCRAFT DAMAGE: Property damage (by fire or other means) that is directly caused by aircraft, other aerial devices, and/or articles dropped from them are covered. The policy does not cover damage or destruction caused by supersonic aircraft flying at supersonic speeds.
RIOTS, STRETCHES, MALICIOUS and TERRORISM DAMAGES: Any act by any person participating with others in any disturbance to public peace (other that war, invasion, mutineer, civil commotion, etc.). is considered a riot or strike, or terrorist activity. The policy does not cover illegal actions.
STORM. TYPHOON. TEMPEST. HURRICANE. TORNADO. FLOOD. Storm, Cyclone. Typhoon. Tempest. Tornado. Tornado. Flooding or Inundation is when water levels rise above normal. Flood and inundation are not just understood in their common sense, i.e. flood in river or lake, but also accumulation of water from choked drains.
IMPACT DAMAGE: Any rail/road vehicle or animal that comes into direct contact with insured property is covered. These animals and vehicles should not be owned or occupied by the insured, or any occupiers of the premises, or their employees acting in the course or employment of the insured.
SUBSIDENCE & LANDSLIDE INCULUDING ROCKSIDE: Subsidence or Landslide/ Rockslide damage to part of the property is covered. Subsidence is the sinking or raising of land to a lower level. Landslide, however, refers to the sliding down of land on a hill.
Normal cracking, settlement, bedding down or settlement of new structures, settlement or movement of made-up ground, coastal erosion, defective design or workmanship, and demolition, construction or structural alterations, or repair to any property, ground-works, or excavations are not covered.
BURSTING OR OVERFLOWING WATER TANKS, APPARATUS, AND PIPES: Property damage or loss due to water, or other causes, such as bursting or accidental overloading of water tanks or apparatus, is covered.
MISSILE TESTING OPERATIONS: Damage or destruction due to impact or other from trajectory/projectiles in connection missile testing operations by Insured or any other person is covered.
DAMAGE CAUSED BY AN AUTOMATIC SPIRNKLER INSTALLATION: Water accidentally released or leaking from automatic sprinkler systems in an insured’s property is covered. These damages or destruction caused by repairs, alterations, or extensions to buildings or premises, or repairs to remove or extend sprinkler installations, or defects in construction, known to the insured are not covered.
BUSH FIRE: This includes damage from the accidental or deliberate burning of bush, jungles, and clearing of lands by fire. However, it does not include damage or destruction caused by Forest Fire.
FIRE INSURANCE POLICY DOES NOT COVERS RISKS
These are the following:
Theft occurring during or following the occurrence of any insurance risks
Nuclear perils or war
Electric breakdowns
Ordoned to be burned by a public authority
Subterranean fire
There is no guarantee that bullion, precious gemstones, curios (value greater than Rs.10000), plans and drawings, money securities, cheque books or computer records will be lost or damaged, except where they are specifically included.
Property damage or loss when moved to another location (except machinery or equipment for cleaning, repairs, or renovation for more that 60 days).
CHARACTERICS OF FIRE INSURANCE CONTRACT
The following characteristics are found in a fire insurance contract:
(a) Fire insurance can be a personal contract
Fire insurance contracts do not guarantee the safety of insured property. It is designed to ensure that the insured doesn’t suffer any loss due to his ownership interest in the insured property. The contract of insurance ends if the insured’s connection to the property is terminated by the transfer to another person. It is not connected to the subject matter of insurance so that it will automatically pass to the new owner. Fire insurance is a simple personal contract between the insured, the insurer and for the payment. Only the insurer can make it validly assignable to another.
(b) It is an entire and unalterable contract.
The insurance contract must be divided if it is binding. The policy does not limit the rights of the insurer to cancel a contract if the insured breaches their duty towards them in relation to one subject matter.
(c) Fire is an immaterial cause
The insured is purchasing fire insurance to cover him against any damage or loss that may result from a fire. It doesn’t matter what cause of fire the insured suffered, as long as it was due to fire. The insurer is responsible for indemnifying the insured, regardless of whether the fire was started improperly or properly lit. The proximate cause of loss must be determined if fraud is not present.
However, the cause of the fire is now material and must be investigated
(1). (1).
(2) The fire must be extinguished with an exception in the contract.
LIMITATION OF TIME
Indemnity insurance was an agreement between the insurer and the insured to confer on them a contractual right which, prima facie, was created immediately after the loss was sustained by an event that was insured against. The insurer then placed the insured in the same situation in which the accused would be in if the event had not happened but in no better. There was a primary responsibility, i.e. To indemnify and a secondary responsibility, i.e. To indemnify and a secondary liability, i.e. to place the insured in his preloss position. The fact that the insurer had the option of how he would place the insured in a pre-loss situation did not make him ineligible to indemnify him in any way. The insured event is the primary cause of liability. The time period began on the date of loss, not the date the policy was cancelled. Any suit filed after this time limit would be barred. [2]
Who MAY BE INSURED AGAINST FIRE
Fire insurance can only be taken by those who have an insurable interest. These are the people who can insure property if they have been found to have an insurable interest:
1. Property owners, regardless of whether they are the sole or joint owner or a partner in the company that owns the property. They do not have to possess the property. A lessee and a lessor can insure it together or separately.
2. Both the purchaser and the vendor have equal rights to insure. The vendor’s right to insure continues until the conveyance is complete and any time thereafter, if there is an unpaid vendor lien.
3. Per Lord Esher M.R., the mortgagee and mortgagor have distinct interests in the mortgaged property. They can also insure it. “The mortgagee doesn’t claim his interest through the mortgagor, but rather by virtue of the mortgage that has given him an interest different from the mortgagor.”[3]
4. Beneficiaries are the beneficiaries and legal owners of trust property. Each can insure it.
5. Bailees, such as pawnbrokers, warehouse men or carriers are responsible for the safety of property they have been entrusted with and can insure it.
PERSON NOT ELIGIBLE TO INSURE
A person who does not have an insurable interest can’t insure a property. Take this example:
1. Unsecured creditors cannot insure the property of their debtors because they have no right against them personally. However, he can insure the debtor’s life.
2. As a shareholder of a company, he cannot insure its property. Macaura v. Northen Assurance Co. [4] Macaura. He had no insurable interest as a shareholder or as a creditor.
CONCEPT OF UTMOST FAITH
All insurance contracts are contracts of the utmost good-faith. The proposer of fire insurance has a positive obligation to disclose all relevant facts and not make misrepresentations during negotiations to obtain the policy. The duty of utmost goodness and faith applies equally to both the insured and the insurer. The assured must act in good faith. The obligation to act in good faith is enforced by requiring the proposer declare that all statements on the proposal form are true and that they will be used as the basis for the contract. Any incorrect or false statement herein will result in the cancellation of the policy. They can then be relied upon by the insurer to assess the risk, to determine the appropriate premium and accept or decline the risk.
The proposal form for a policy on fire is structured so that the insurer can obtain all relevant information to help them assess risk and determine the premium. The proposer must provide information about:
Name, address, and occupation of the proposer
Description of subject matter that is sufficiently detailed to allow identification
Description of the location where it is located
What the property is used for, whether it’s for manufacturing or hazardous trade.
If it is already insured
Also, a personal insurance history that includes any claims made by the proposer, etc.
The proposer should not only answer the questions on the proposal form but also disclose whether they were questioned.
1. Any information that would indicate a higher risk of fire than normal
2. Any circumstance that would suggest an insurer’s liability is greater than normal can be expected, such as the existence of valuable documents or manuscripts, etc.
3. Information bearing upon the more; danger involved.
The proposer does not have to disclose.
1. Information that the insurer might be assumed to have in the normal course of his insurance business;
2. These facts tend to prove that the risk of an accident is lower than it would otherwise be
3. Facts about which information is not required by an insurer
4. There are certain facts that cannot be disclosed because of a policy condition.
The assured is therefore under a solemn duty to disclose all material facts that may be relevant to the insurer in deciding whether to accept the proposal. The disclosure of relevant facts must be made by the
DOCTRINE OF PROXIMATE CAUSE
It is difficult to determine the cause of loss if more than one peril acts simultaneously. The doctrine of proximate causes is helpful in such situations.
Pawsey v. Scottish Union & National Ins. Co. [5] was defined as “the active, efficient cause that sets in motion an event chain which produces a result, without any intervention from any force or source other than the one being started.” Even though it may not be the closest in time, it is the dominant and most effective cause. In order to determine if the insurer is responsible for the loss, it is necessary to investigate and identify the cause of the loss when there is one.
PROXIMATE CAUSES OF DAMAGE
Fire insurance covers fire-related damage. A fire can be started by lightening, explosion, or implosion. It could be caused by riot, strike, or any other malicious act. These factors must eventually lead to a fire, and the fire must be the cause of the damage. The fire policy would not cover property stolen by militants. It is not possible to argue that the insured was liable for the claim because the claim would not be valid if the fire was the cause of the damage. [6]
PROCEDURE TO GET A FIRE INSURANCE POLICY
Below are the steps required to obtain a policy for fire insurance.
1. Selecting the right insurance company:
Many companies offer fire insurance for unforeseen circumstances. When choosing an insurance company, the individual or company should be careful. Goodwill and market standing should be factors that are considered when deciding on an insurance company. You can approach the insurance companies directly or through agents. Some of these agents are appointed by their company.
2. Submitting the Proposal Form
For proper consideration and approval, the individual or business owner must complete the prescribed proposal form. The Proposal Form must be filled out in good faith. It should also be accompanied with documents verifying the value of the goods or property that is to be insure. Each company has its own Proposal Form that contains the specific information.
3. Survey of the property/ Consideration
After the Proposal Form has been completed, the insurance company will conduct an “on-the-spot” survey of the property and/or goods that is the subject of the insurance. The company will usually appoint the surveyors or investigators to conduct this survey. They must report back to the company after conducting extensive research and survey. This is essential to determine the premium rate and assess the risk.
4. Acceptance of the proposal:
After the comprehensive and detailed report has been submitted by the surveyors, and other related officers to the insurance company, the latter reviews the Proposal Form as well as the report. The company will accept the Proposal form if it is satisfied there is no fraud, foul play, or lacuna. It then directs the insured pay the first premium. The insurance policy begins after the insured has paid the premium and the company has accepted it. After the payment of the first premium, the Insurance Company issues a Cover Note.
PROCEDURE UPON RECEIPT ORDER OF A NOTICE OF LOSS
The insurer will request that the insured provides details regarding the loss as part of a claim upon receipt of the notice.
1. The circumstances and the cause of the fire.
2. Situation and occupancy of the property where the fire took place;
3. The insured’s interest in the insured properties; this is the capacity of the insured to claim and whether or not any other parties are interested in the property.
4. Additional insurances for the property
5. Each item’s value at the time of loss, together with evidences, and salvage value, if any.
6. Claimant Sum
The insurer will also be subject to such information regarding the claim. This information will allow the insurer to confirm whether or not there is a claim.
(1) The policy is now in effect.
(2) The peril that causes the loss is an insure peril.
(3) The insured property is the property that has been damaged or lost.
Calculation of the property’s value
The insured property’s value is
1) Its current value at the time it is lost.
2) In the area of loss,
3. Its intrinsic or real value, without regard to its sentimental value. It is not possible to account for potential profit loss or any consequential loss.
FILING OF CLAIMS
What is the process of claiming?
A contract of fire insurance may be in force after one or more insured perils are operated on an unsecured property. You may also have uninsured perils that are operating concurrently or in succession to the property. These conditions must be met in order for the claim to be valid:
1. If both insured and uninsured perils were involved, the occurrence must be due to an insured peril.
2. The policy exceptions must not cover the operation of peril.
3. The insured property must have been damaged or lost by the event.
4. The policy must have been in force at the time of the occurrence.
5. All policy conditions must be met and the insured should comply with all requirements after a claim has been filed.
MATERIAL FACTS IN FIRE-INSURANCE: PREVIOUS CONVICTIONS OF THE ACCUSED
A criminal record of an insured could impact the moral hazard. Insurers had to assess this risk and would consider it a material nondisclosure if the plaintiff didn’t disclose a serious crime such as robbery.
INSURED’S DUTY ON FIRE, IMPLIED DUTY
The insured has an implied duty to act in good faith towards his insurers when a fire breaks out. He must also do all he can to prevent or minimize any loss. To accomplish this, he must (1) take all reasonable steps to extinguish the flames or stop its spread; and (2) aid the firefighters and other emergency personnel in their efforts to do so.
The object may then be taken to safety. Any damage or loss that the insured property sustains during attempts to fight the fire, or its removal to safety, etc. will be considered loss proximately due to the fire.
The insured may be disqualified from any rights to reinstate indemnity under the policy if he fails to perform his duty or increases the burden on the insurer. [7]
INSURER’S RESPECTIVE RIGHTS IN THE EVENT OF A OUTBREAK OF FIRE
(A) Implied Rights
In order to fulfill the insured’s obligations, the law gives the insurers rights due to their obligation to indemnify the insured. In this way, the insurers are entitled to-
Use all reasonable means to put out the flames and minimize property damage.
To do this, you will need to take possession of the property.
Because the fire is a natural consequence of it, the insurers are liable for any property damage sustained during the efforts to extinguish it. This was established in Ahmedbhoy Habibhoy (Bombay Fire Marine Ins.). Co [8] The extent of damage resulting from an insured peril must also be evaluated when the insurer returns and not at the time the peril ended.
(B) Loss resulting from steps taken to avoid the risk
The insured risk did not cause the damage and it was not recoverable. The Canadian Supreme Court ruled in the case of Globe Insurance Co. Ltd. v. Canadian General Electric Co. Ltd. [9] that the fire fighters mistakenly believed that they were required to prevent an explosion. Therefore, the insured risk was not liable for the loss.
(C) Express rights
Condition 5: In order to protect their rights, insurers have provided better rights in this condition. The insurer and any person authorized by them may enter, take, or keep possession, of the building or premises in which the damage occurred or request it be delivered to them. They can also deal with the property for any reasonable purpose, such as examining, arranging for removal, or selling or disposing of it for whom it may concern.
What is the claim?
The Insured must immediately notify the insurance company if there is a fire loss that is covered by the fire insurance policy. Within 15 days after the loss occurs, the Insured must submit a written claim detailing the damages and the estimated value. You should also declare details of any other insurance policies on the same property.
At his expense, the Insured must procure and produce any document such as plans, account books, investigation results, etc. upon request by the insurance company.
HOW IS INSURANCE ABLE TO END?
In the following situations, insurance under a fire policy can be cancelled:
(1) The insured makes misrepresentations, misdescriptions or fails to disclose any material particular to the insurer and the insurance company will not cover the policy.
(2) In the event of a fall or displacement in any insured building range, structure, or part thereof, insurance can be renewed on revised terms after seven days, except where the fall/displacement was caused by an insured peril.
(3) Insurance can be terminated at any time at the request of an insured or at the company’s option, with 15 days notice to the insured
CONCLUSION
The risk of damage to tangible property can be many, including fire, floods and explosions, war, riot, and riot. Insurance protection can be purchased for most of these risks in combination or separately. There are many ways to express the coverage. Fire insurance is strictly defined as providing protection against fire and flames. All requirements must be met before a policy can be granted for fire insurance. The insured have a legal and moral obligation to act in good faith. They must tell the truth and not lie to get money. All insurance policies contribute to the development of a developing nation. Insurance companies are required to assist the insured in times of crisis.
