SUMMERY

INTRODUCTION MEANING Fire Insurance Means Insurance against loss due to fire. A fire insurance policy involves an insurance company agreeing to pay a certain amount equivalent to the estimated loss caused

by fire to the insured, within the time specified in the contract. The indemnity is subject to change depending upon the policy. One should confirm with the insurer about the types of risks covered, since one cannot insure the property against all types of risks of fire. Fire, in order to make the insurer liable under the contract, must satisfy two conditions. First, there should be actual fire or ignition, and second, the fire must be for tuitions in its nature.

FIRE INSURANCE CONTRACT Fire Insurance Contract In strict sense, a fire insurance contract is one: Whose principle object is insurance against loss or damage occasioned by fire. The extent of insurer's liability being limited by the sum assured and not necessarily by the extent of loss or damage sustained by the insured: and The insurer having no interest in the safety or destruction of the insured property apart from the liability undertaken under the contract. Against risk of fire on any material or property. An indemnity contract against actual loss to the maximum limit of sum assured. Only issued for one year and renew every year. Can be insured from one or more insurer. Contract of utmost good faith. Fire insurance contract may be defined as "an agreement, whereby one party in return for a consideration undertakes to indemnify the other party against financial loss which the latter may sustain by reason of certain defined subject-matter being damaged or destroyed by fire or other defined perils up to an agreed amount." The party responsible to indemnify the loss is called the insurer, the party who is to be indemnified is called the insured, the consideration for the contract is termed 'the premium', the defined subject-matter is termed 'the property insured" the sum set forth in the contract is called the assured sum, and the document containing the terms and conditions of the contract is known as 'the policy. The contract of insurance involves all the elements of an ordinary contract and insurance contracts. The elements of contract are discussed in following paragraphs.

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Ignition: The expression in the policy we have to construct is loss or damage occasioned by fire. This means that loss or damage must be either by ignition of the article or property or premises or part thereof. In other words, the damage should be occasioned by fire. Loss or damage caused by excessive fire heat cannot be included in 'loss or damage by fire'. If should be proved here, that the loss should be caused by fire. The cause of fire is not important. The fire even if caused by the negligence of the servant or himself may come under the definition of fire. There should be no fraud or willful misconduct by the assured. There should be actual ignition but a process resembling fire may not be fire. For example, the damage done due to smoke due to faulting chimney, or overheated iron are not the example of fire. Similarly chemical actions, explosion, lighting, etc. are not occasioned or example of fire. Fire should be accidental and not intentional: Any loss caused by fire lighted purposively is not a loss by fire if it was intentional. However, the property burned accidentally in an ordinary fire, such as domestic fire, the loss is covered even if the fire remains under control. When a fire was purposively lighted but became out of control at a later stage is taken under the definition of fire. The object of fire insurance is to indemnify the insured against accidental loss by fire.

Elements of Fire Insurance Contract: 1. Features of General Contract: All the features of general contract are also applicable to the fire insurance contract. Such as proposal and acceptance, consideration, agreement between the parties, legal competence of the parties and legal venture. (a) Proposal: The proposal for fire insurance can be made either verbally or in writing. The proposer gives the necessary description of the property to be insured.

In practice the printed proposal form is used for the purpose. Introduction, type of properties, value of properties, construction, occupation, etc., are the various information which is required by the insurer. The answers to these questions must be completely correct. The assured must disclose all the material facts and should observe utmost good faith. The description of the subject-matter of insurance is the basis of contract for assessing the risk and fixing the premium. (b) Acceptance: On receipt of the proposal form, the insurer will assess the risk. Sometimes, when the contents and subject-matters are not of very high amount, the insurer may accept on the basis of proposal forms only. When the subject-matters is of larger magnitude and where the hazard involved is of a variable or unknown nature, the insurer may send his surveyor to survey the property. The surveyors being expert in the field of insurance evaluation will consider the proposal in the light of this report. The unknown proposers are required to submit an evidence of respectability. The insured is required to submit a certificate from some known and respectable person about honesty and integrity. As soon as the proposal is accepted, the assured is informed about the decision. (c) Commencement of risk: The risk commences as soon as the contract is completed provided there is no specific time for the purpose. As soon as the proposal is accepted, risk will commence irrespective of the fact that no policy was issued and no premium was paid. Where risks are unknown and tremendous, the payment of premium will be the basis of the completion of the contract. The risk will commence only when the premium has been paid and not before that when the policy has been issued, payment of premium will not be the basis of commencement of risk. (d) Cover note: The insurer issues a 'Cover Note' or 'Interim Protection Note' when the risk was accepted provisionally or subject to the condition of payment of premium. This note will cover the property so far the final policy has not been issued. If loss occurs before issue of policy the cover note will be sufficient to prove insurance. The cover note however is not taken at par to the policy.

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Policy: The insurer issues a duly stamped policy which will bear all the terms and conditions of the contract. Any contract of fire insurance comes within the meaning of the word 'policy'. It is a statutory and formal document of insurance contract. There are different forms of policies for different types of policies. However, a standard form is also used. The policy contains the name and address of the insured, the subject-matter of insurance, the sum insured, the term and the premium. There are various clauses governing the conditions of insurance contract. The terms and conditions of the policy can be changed.

Period of Fire Insurance Policies : Usually fire policies are issued for one year and are called 'Annual Insurance.' Policies issued for a period shorter than one year are known as 'Short-term Policies' and those issued for a period more than one year are called 'Long-term Polices'. But in practice only annual policies are common. 'Short- term' and 'Long-term' policies are rarely used. Long-term policies are generally issued in case of building. Alteration in the policy will be made according to the change in building and terms of insurance. The premium rate is determined according to the nature, location, construction of the property. Moreover, the period of insurance is also taken into account for computing premiums More than one fire during a Period When there is more than one fire in respect of the same subject-matter insured, the insurer is not bound to pay more than the sum assured. During the policy-life, payment of each loss, automatically, reduces the amount of the policy by the amount so paid. When, after payment of certain losses, the property insured is totally destroyed, the insurer will pay loss not more than the balance of insured amount remaining after compensation of the previous losses. However, if the insured is willing to get payment of full loss, he can reinstate the assured sum to the original amount by paying afresh premium on a pro-rata basis to the date of expiry. More than one Policy : If the same subject-matter is insured with more than one insurer, he cannot realize more than the actual loss from all the insurers. Each insurer will pay his ratable proportion of loss to the property insured against fire. If there is average clause, then the insurers will pay accordingly.

2. Insurable interest: Insurable interest is the general principle of insurance without which insurance cannot lawfully be enforced for an insurance unsupported by an insurable interest would be a gambling transaction. Insurable interest will be there where the subject-matter should be in such a position that the insured may suffer loss at the time of damage and may gain by its protection. The insurable interest in fire insurance must be present at the time of contract continue throughout its currency and at the time of loss. Insurance contract will be invalid if the property is sold to another party. Similarly if there is no insurable interest at the time of insurance, the contract will be invalid. The following conditions must be fulfilled to constitute an insurable interest. (i) There should be a physical object capable of being damaged or destroyed by fire. (ii) The object must be the subject matter of insurance. (iii) The insured must stand in such relationship as recognized by law where the insured is benefited by the safety of the subject-matter or be prejudiced by its loss. The insurable interest is the 'pecuniary interest'. The fire insurance is a personal contract between the insured and the insurer. So, the transfer of interest would invalidate the contract. The following persons have insurable interest in the subject-matter concerned. 1. The owner of the property or asset whether fixed or current has as insurable interest whether he is the legal owner or the equitable owner. The owner may be a single or joint, holder. 'Partial owner can take policy for full value as trustee of all the property. A Life tenant entitled to the use of the property during his life time only has an insurable interest. 2. An agent has insurable interest in the property of his principal. 3. A partner has an equitable interest in the firm's property. 4. A creditor has an insurable interest in property on which he has a lien for the debt. 5. An insurer has it in respect of risks underwritten by him for the purpose of reinsurance. 6. Where the subject-matter is mortgaged, the mortgagor has an insurable interest in the full value thereof and the mortgagee has an insurable interest in respect of any sum due to become due under the mortgage.

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7. A bailed can insure any article or property bailed. He may be a gratuitous bailed or bailed for reward. 8. A trustee has insurable interest in the property put on trusteeship. 3. Principle of Good Faith: The contract of fire insurance is one in which the observance the utmost good faith-uberrima fides-by both the parties are of vital significant. The utmost good faith in fire insurance has two aspects-first, disclosure of material facts and second, preservation of the property insured. The insurer and the insured must furnish detailed information regarding the subject-matter to be insured. The insured, since he has more, information about the subject-matter, must disclose all the information asked truly and fully. The, assured is also required to disclose all the material information which are known to him although it was not asked by the insurer; material fact is one which influences the decisions of the insurance. The decision may be pertaining to the acceptance or declination or determination of the premium. In case of fire insurance the examples of material facts are construction of buildings. If the assured has not observed good faith, the contract can be avoided by other party. It was immaterial to plead that the insured was unaware of the fact and could not disclose. In a given circumstance, it is expected from the insured to-know all the material facts. The insurer has also to disclose such material facts as are within his knowledge. The second phase of good faith is preservation of property. Thus, the observance of good faith is necessary not only during the negotiations of the contract but throughout the term of the policy and in making claims. Any change after commencement of risk must be communicated to the insurer. The insured or his agents as well as the insurer must take all such steps as may be reasonable for averting or minimising loss. Since the insured is near to the property, he must act to prevent the fire and if fire occurred, he must do his utmost to extinguish it. In such cases he must act as if he was not insured. Exceptions : In the following circumstances, the insured is not required to disclose information. 1. All those circumstances which diminish the risk. 2. All those facts which are known or reasonably presumed to be known to the insurer.

3. Information which are of common knowledge. 4. Those facts which the insurer in the ordinary course of his business ought to know or which the insurer ought reasonably to have inferred from the details given. 5. Those facts which are superfluous to disclose by reason of a condition or warranty.

4. Principle of indemnity: The doctrine of indemnity aims to compensate the insured for a loss sustained, and the compensation should be such as to place him as nearly as possible in the same pecuniary position after the loss as he occupied immediately before the occurrence. The insured cannot claim anything in excess of the amount required to recoup the actual loss sustained. The insurers undertake to make good the insured's loss by monetary payment or by reinstatement or replacement so that the insured shall be fully indemnified, but this is subject to the sum insured. The law does not sanction any insurance which would enable the insured to profit by the destruction of the thing destroyed. It will check the temptation to destroy the property insured thereby to secure the money. The assured amount is not the measure of indemnity but it sets an upper limit up to which the loss can be indemnified. The actual amount of indemnity will be the market value of the subject- matter destroyed or damaged by fire at the time and place of the occurrence of fire. It will never exceed the assured amount. When the actual loss is more than the assured amount then only the insured sum will be paid and nothing more is paid. But, this principle does not hold well when the policy is valued policy. Here, the basis of indemnity will not be the actual cash value of the property at the time of loss but the insured value which is named in the policy when it was taken. In a valued policy, no consideration is given to the actual loss. Thus, the amount of claim may be greater or less than the actual loss at the time of fire in case of valued policies. Interpretation of Indemnity : The insured is entitled to perfect indemnity subject to the sum assured being sufficient. But, in practice such perfection may be difficult to attain. Previously, the meaning of the word 'indemnity' was understood in the sense of material indemnity only, i.e., tangible and material property only. The intangible loss, i.e., loss of profit, rent, etc. was not compensated.

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It worked as a great hardship to the honest insured persons. Now, the insurance is extended to cover not only the material loss of property insured but also to cover the 'consequential loss'. When a business property is burnt, not only the material loss on account of the destruction of building, plant and stock are covered but the consequential loss of profits on account of cessation of sales, salaries, taxes, rent, rates, etc., are also indemnified. Now a day's tangible and intangible losses are insured and the consequential loss is also within the meaning of indemn

CHARACTERistics

IMPORTANT OF FIRE INSURANCE Fire insurance is the type of insurance coverage, in which an individual pays some sum of money to the company, in exchange to receive advantages for the fireplace losses. Fire insurance provides the security for home, share, home furniture, enterprise buildings, etc,. Fireplace insurance provides the price of alternative of properties and assets, which gets broken due to the fireplace incident. Fire insurance provides the advantages for the homeowner in these ways

It provides the price of damage for the building It provides the rc, if any home furnishings are damaged due to the fireplace incident, like plywood home furniture, carpets, clothes.

It provides alternative or maintenance price for the electronic items,which is broken due to fireplace, like television, computer, air coolers.

Fire insurance provides advantages to the enterprise in the following ways

It covers the price of share broken due to the fire It provides the loss of life advantages to employee, in case of loss of life occurred due to the fireplace incident. It provides the alternative or maintenance price for the machines, if they get broken due to fireplace incident. It provides the medical expenses for the employees, if they get injured due to the fireplace incident.

Fire accidents are very much unexpected but are heavily destructive. Hence, having a fireplace insurance is very much essential.

The expectations of living have definitely modified with the times and this only indicates that more people look for any paths that can lead to benefits. With there being so many kinds of insurance available in the market, some select to leave fireplace insurance, stating that the threats of a fireplace developing are more distant, than say a enter. True, auto insurance, insurance all seem to take main concern, but that does not make fireplace insurance any less important. Protecting property or home from fireplace is essential, more so if you know the chance of one developing is very real. Mature qualities usually bring more possibility with them. Their age predisposes them to have some substandard electrical wiring, or some leaking plumbing, which would all end up producing a fireplace. Modern, more latest qualities are at less possibility, but random shoots can happen, like during hefty stormy weather when super hits. A fireplace insurance coverage protects for the harm due to a fireplace in two ways. One is paying out the sum of money comparative to the value of the home or business, after the fireplace is out. The other is by getting together with the costs of changing the piece of property or home, and in this case, that indicates fixing and restocking. Its bad enough when your home uses up down due to some inevitable incident, but when you do not have an insurance plan to help you move back to your typical life, its even more

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intense. With that being said, it is well to consider the significance of a fireplace insurance plan, especially if you know you cannot manage to change the home in your own financial initiatives. You get a chance to explain the essentials of the insurance plan you want, showing what you want protected in the insurance plan, and what to be overlooked. If you can not get your kind of insurance plan with one insurance provider, there are always so many others to select from.

mportance of Fire Insurance for Businesses No type of risk is more dangerous than fireplace and arson that intends enterprise building in the U. s. Business. This is why high-risk enterprise qualities like dining establishments are recommended to take additional fireplace insurance to make sure they are well ready for such harmful activities. Basically, fireplace insurance can provide complete take care of against fireplace and smoking damage to the property and its items. Since the actual features and price of take care of will differ on the level of take care of you used for, it is important to make sure that you are effectively protected. Thus, conditions and insurance plan information must be tested before carrying out to a fireplace insurance coverage. Furthermore, there are other accessories that go with fireplace insurance that you have to involve in your take care of. Although they will price you a little bit more on charges, these will confirm to be important in the future. Such involve legal take care of, personal belongings, and old for new take care of. Just take be aware of administration accepted fireplace protection products that you can use, which will help bring down the price of your fireplace expenses.

FIRE INSURANCE LAW There is no legislation for fire insurance, as in the case of marine insurance, which is of the Indian Act, Marine Insurance, regulated 1963rd Insurance 1938 Indian Act has been focused on the regulation of the insurance business as such and not with the general principles or special law on insurance contracts fire. So also the general insurance business (nationalization) Act, 1872. in the absence of legislation on this issue, the courts in India to be the subject of fire insurance to date on the orders of the courts and left views of the English lawyers handle it. Be measured to determine the value of the property damaged or destroyed by the fire for the compensation by insurance against fire, it was the value of the property to the insured. Prima facie case that the value was measured with reference to the value of the property before and after the loss. However, such an evaluation method was not applicable in cases where the market value is not the real value of the property to the insured as if the object was used by the insured home or business. In such cases, the measure of compensation for the cost of reinstatement. In the case of Lucas v. New Zealand Insurance Co. Ltd. [1], where the insured property purchased and held as a productive investment income, and therefore the court decided that the appropriate measure of compensation for property damage caused by fire, the cost of restoration.

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Insurable object in Fire Insurance : Insurable object in Fire Insurance Building Electrical installation in buildings Machinery, Plant and equipment Goods ( raw materials, stocks in process, semi finished, finished etc ) in factories Godowns, Goods in open Contents in dwellings Shops, Hotels etc. Furniture, fixture and fittings, pipelines located inside or outside the compound etc.

scopes

Ordinary scope : Ordinary scope Accidental fires, lightning, explosion and implosion due to pressure vessels(used for domestic purposes) By rioting mob, striking workers, malicious acts by third parties and damage by terrorists Impact damage by any rail/road vehicle or animal by direct contact. Commodities damaged by water used for extinguishing fire. Loss\damage caused by pulling down of adjacent

buildings by the fire brigade to prevent the flames from progressing. Breakage of commodities in the process of their removal from the premises where fire is intense. Ordinary scope contd Aircraft and other aerial and and/or space devices and/or articles dropped there from, excluding destruction or damage occasioned by pressure waves caused by such devices Payments made to people employed in extinguishing fire. Subsidence and landslide, including rock slide. Natural calamities like storm, cyclone, typhoon, hurricane, tornado, flood and impact damage. Damages caused due to bursting or overflowing of water tanks, apparatus and pipes Bush Fire Special scope : Special scope The fees paid to the architect, surveyor or consultant engineer, if such fees exceeds more than 3% of the claim money. The expenses incurred in connection with removal of wastages from the construction site, if that amount exceeds more than 1% of the claim money. Loss to the goods kept in the cold storage due to fluctuations in electricity/power but within the causes stated in the policy. Loss arising out of earth-quake, fire or combustion. Forest fire. Loss due to falling the goods from fork lifts, or from own vehicle of the insured, etc. Loss due to spontaneous combustion.

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Comprehensive scope :

Comprehensive scope Risks of standard policies. Special risks which can be insured by paying extra rate of premium. Excluded perils in the standard policy. Consequential losses or risks arising consequent to fire. Loss of net profit Loss of fixed expenses, e.g., salaries to employees, building rent, interest on loans, etc. Increased cost on account of problems arising out of fire. Rent of the building taken on hire, till the time of getting the damaged building repaired or renovated, etc.

EXCLUSION FOR FIRE INSURANCE

GENERAL EXCLUSIONS : GENERAL EXCLUSIONS The first 5% of each and every claim subject to minimum of Rs.10,000/in respect of Act of God only perils such as lightning, STFI, Subsidence, Landslide and Rockslide. The First Rs.10,000/- for each and every loss arising out of other perils. The excess shall apply on the basis of per event per insured. However this does not apply to policies covering dwellings.

EXCLUDED PERILS : EXCLUDED PERILS War and War like perils : Loss, destruction or damage caused by war, invasion, act of foreign enemy, hostilities or war like operations( whether war be declared or not ), civil war, mutiny, civil commotion assuming the proportions of or amounting to a popular rising, military rising, rebellion, revolution, insurrection or military or usurped power.

OTHER EXCLUSIONS : OTHER EXCLUSIONS Loss or damage caused by ionizing radiation or contamination Loss or damage caused by pollution or contamination excluding a) Pollution or contamination which itself results from a peril hereby insured against, b) any peril hereby insured against which itself results from pollution or contamination. Loss or damage to stocks in cold storage premises caused by change of temperature. Loss, destruction or damage to any electrical machine, apparatus, fixture or fittings arising from or occasioned by over running, excessive pressure, short circuiting, arcing, self hearing or leakage of electricity from whatever cause. Loss, destruction or damage to bullion or unset precious stones, any curious or works of art for an amount exceeding Rs.10,000/-, goods held in trust or on commission, manuscripts, plans, drawings, securities, obligations or documents of any kind, stamps, coins or paper money, cheques, books of accounts or other business books, computer system records, explosives unless otherwise expressly stated in the policy. OTHER EXCLUSIONS contd

Procedure of effecting fire insurance : Procedure of effecting fire insurance Selection of insurer. Presentation of proposal in the prescribed form. Evidence of goodwill. Recommendation by agent. Survey of the subject matter. Report by surveyors. Acceptance of proposal. Depositing of premium money. Issue of cover note. Issue of insurance policy.

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Types ofFire Insurance Policy : Types ofFire Insurance Policy In this policy the indemnity is a fixed amount agreed upon at the time of signing the contract. The insurance company pays that amount regardless of the actual loss due to fire. The insured is benefited when the market value of the property declines , but suffer loss when the market value appreciates. It is also known as insured policy. The valued insurance policy is usually offered for such items like jewellery, furs, or paintings, which value is difficult to estimate once they are damaged or destroyed by fire.

Valued POLICIES The policy indemnifies the cost of replacement of machinery to a condition equal to but not better or more extensive than its condition when new. Hence this policy is new for old. This policy can be issued for Building, Plant and Machinery, Furniture Fixture & Fittings only. After the World Wars, when inflation was high, the indemnity on market value basis was grossly inadequate to rebuild the factories/ plants.Hence this policy was launched on public demand Any technical improvements will go to the account of the insured. Reinstatement must be carried out by the insured in order to obtain the benefits of the special basis of settlement. The work of reinstatement must be completed within 12 months from the date of loss, failing which

the claim will be settled on market value basis. The insured also needs to pay higher rate of premium.

replacement POLICIES It is taken out for those goods which are frequently changing in a warehouse. This policy can be taken on those goods which are lying on different localities or godowns. Since quantity of goods lying in the warehouse or at different places fluctuate from time to time, it becomes difficult for the owner to take a specific policy. Floating policies are suitable to those traders or products whose raw-materials or merchandise are lying at different localities or godowns. For example:Some of the goods of other trader are kept in one godown, and few kept in another godown, some kept in the railway godown or some at the sea port open. To cover the risk of goods lying at different places under one policy.

floating POLICIES

Many insured may have stocks which frequently fluctuate in value. To take care of such fluctuation in quantity/ value , a declaration policy is issued. The sum insured will be the maximum possible value at any point of time during the policy period. The minimum sum insured will be Rs. 1 cr. in one or more locations and shall not be less than Rs.25 lacs in atleast one of these locations. Monthly declarations based on a) The average of the values at risk on each day of the month or b) The highest value at risk during the month. must be submitted by the insured before the end of the succeeding month.

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declaration POLIC On maturity of the policy, average value of the stock is taken out and on average value the final premium money is find out. If it is less then initial charged premium then insurer will return excess amount. If declaration is not received for a particular month, the sum insured will be treated as the declaration for the month. Reduction in sum insured is not allowed. Increase in sum insured can be done with prior agreement. Basis of value for declaration will be the market value. Declaration policy cannot be issued for stock in process/ retail stores /short period insurance

adjustable POLICIES : It is issued for existing stock. In this policy premium rate shall be adjusted according to increase or decrease in the value of stock, this change will be notified to the insurer by the insured. In case of loss by fire, the amount notified by the insured at the maturity of the policy is taken as final and indemnified upto that limit. It is a contract limited to merchandise or stock in trade other than farming stock. adjustable POLICIES

Slide 33: A specific policy is a type of policy in which the property is insured for a specific sum irrespective of its value. If there is loss, the stated amount will have to be paid to the policyholder. But the actual value of the subject matter is not considered in this respect. For example, if a property is insured for Rs. 10000 though its actual value is Rs. 20000. In the event of loss to property, not more than Rs. 10000 can be recovered. Specific Policies Slide 34:

Specific Policies Where a property is insured for a sum which is less than its value, the policy contain a clause that the insurer shall not be liable to pay the full loss but only that proportion of the loss which the amount insured for, bears to the full value of the property. Amount of Indemnity = Policy money x Actual amount of loss Market value of the property insured For example A value of the property is Rs.1,00,000. It is insured for Rs.60,000 and the amount of loss is Rs.60,000. The insurance company will not pay Rs.60,000 to the policyholder but will pay Rs.36,000 .

AVERAGE POLICIES The insurance is affected on the maximum value of stock remains throughout the year and accordingly premium charged. In the case of no indemnity, one third of the premium paid is return to the insured at the end of the year. It can be treated as a discount in consideration of variations in value of goods. discounted POLICIES with maximum value.

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