NATURE AND USE OF FIRE INSURANCE & FIRE INSURANCE CONTRACT

Submitted To:Ms. Renuka (Asstt. Professor)

Submitted By :Ankush Sharma Roll No.:- 1318 BBA final 30210000025

DEFINITION & NATURE

Fire

insurance is a device to compensate for the loss consequent upon destruction by fire. Thus the fire insurer shifts the burden of fire losses from their actual victims over to all the members of the society. It is a cooperative device to share the loss. It relieve the insured from the horror of the fire losses to which hi is exposed.

FUNCTIONS

It is a well-known fact that the fire causes huge losses every year. The individual owner by taking fire insurance can prevent the fire waste to some extent. The insurer acts as a middle man between all the members of the society who are exposed to the fire risk on the one hand and the members who will be the actual victims of the fire losses on the other. The insurer charges the premium from all the insured members and makes good the losses when they occur to any of them.

CONTINUE
The

system of fire insurance cannot save the society from the economic loss to the community to the extent of the property lost by fire, but it compensates someone and this saves him from a ruinous loss, at the cost of group of some others.

CAUSES OF FIRE
Fire

waste is the result of two types of hazard viz.., Physical and moral Physical Hazard :- it refers to the inherent risk of fire in the property which may occur due to inflammable nature, construction, artificial lighting and heating, lack of extinguishing apparatus use of the property etc. Moral Hazard :- the moral hazard depends upon the man as physical hazard depends on the property. The property may be set on fire by the owner or by any person with his willingness, carelessness and lack of sense of duty may also increases the fire waste.

PREVENTION OF LOSS
Insurance help in two ways: Indemnification or curative efforts :- According to doctrine of indemnification, the financial loss suffered by the perils insured against will be compensated in fill, not more than this and not less than this. Preventive efforts :- The loss cannot be prevented by insurance. But, the insurers help those who are engaged in the preventive efforts by granting financial and other assistances.

PREVENTIVE EFFORTS ARE DIVIDE INTO

TWO PARTS
1.

Private activities :- private activities are which include those activities which the property owner may engage in for the purpose of preventing fire loss. Insurers give sincere advice of financial help to property owner on the following factors. Construction Fire services Occupation Management Exposure

PUBLIC FIRE PREVENTION ACTIVITIES

Fire insurers have performed numerous important services to reduce the fire waste with the help of public institution which are engaged in fire fighting activities. Community surveys Standard schedule for grading cities Underwriters laboratories Equipment Salvage corps and salvage works by fire departments Legislation and regulation

FIRE INSURANCE CONTRACT

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 damaged or destroyed by fire or other defined perils up to an agreed amount.

ELEMENTS OF FIRE
INSURANCE CONTRACT
1.

Features of General Contract

All the features of general contract are also applicable to the fire insurance contract.

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.

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. 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. 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.

2. INSURABLE INTEREST

Insurable interest is the general principle of insurance without which an 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 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

3. PRINCIPLE OF GOOD FAITH.

The contract of fire insurance is ne in which the observance of the utmost good faith-uberrma fide-by both the parties are of vital significant. The utmost good faith in fix insurance has two aspects-first, disclosure of material facts and second, preservation of the property insured.

Exceptions : the following circumstances, the insured is not required to disclose information.

1.
2.

3. 4.

All those circumstances which diminish the risk. All those facts which are known or reasonably presumed to be known to the insurer. Information which are of common knowledge. 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 by monetary payment or by reinstatement or replacement so that the insured shall be fully indemnified, but this is subject to the sum insured.

CONSEQUENCES OF INDEMNITY
1. 2.

3.

4.

The insured may claim only the amount of the loss sustained. In case of partial damage, the insured may claim compensation only for the amount of damage done. The insured must transfer to the insurer any rights which he may possess against a third party in respect of the loss. If the insured have effected more than on policy, he is precluded from obtaining more than one complete indemnity.

5. DOCTRINE OF SUBROGATION

Subrogation means the right of one person to stand in the place of another and to avail himself of the\ latters rights and remedies. The principle of subrogation is just ac corollary to the principle of indemnity. The insured can realize only the actual value of the loss or damage to the property according to the principle of indemnity and it follows that if the damaged property has any right against a third party regarding that property. These must pass on to the insurer. If the assured is allowed to retain them, he shall have realized more than the actual loss which is contrary to the indemnity principle.

6. WARRANTIES

The contents of proposal form are expressly incorporated in the policy, which form warranty. Warranty is that by which the assured undertakes the some particular thing shall or shall not be done, or that some conditions shall be fulfilled or of facts. Warranties which mentioned in the policy are called express warranted and those warranties which are not mentioned in the policy are called implied warranties.

7. PROXIMATE CAUSE

The rule is that the immediate and not the remote cause is to be regarded - cause proximate non remote spectator. Proximate cause is very important in fire insurance. The principle of proximate cause has already been while paying the claim. If the property insured is burned but the fire was preceded and brought into operation by an excepted was the proximate. The remote cause is when an incendiary bomb damaged the property, the proximate cause is enemy action.