case study on fire insurance

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• Judgments 23397

...where mischief arises from fire in fire insurance cases and from perils of the sea in maritime insurance , and the natural and almost inevitable consequence of that mischief is to create further...conduct of the Insurance Companies after the fire had been extinguished. Mr. Inverarity has before us attempted to show that what his client wants to do before the arbitrators is to prove that this...the case, because the deterioration of machinery from neglect on the part of the Insurance Companies to take care of it is not an inevitable or direct consequence of the mischief by fire . It is only...

...occurs:“Where the contract to insure or issue a policy of fire insurance does not specify the terms and conditions of the policy, it is a general Rule that the parties will be presumed to have contempla...the Rule of the Sun Fire Office (1889) 14 AC 98 and the Hartford Fire Insurance Company AIR (1956) SC 1288 cases . The assurers were, therefore, within their rights...Dhulian Murshidabad being desirous to effect an insurance from loss by fire , for Rs 51,000 on the following Property viz.:One Pucca built and roofed bldg. (C.J...

..., p. 953) the following occurs : "Where the contract to insure or issue a policy of fire insurance does not specify the terms and conditions of the policy, it is a general rule that the parties will be presumed t.... Dhulian Murshidabad being desirous to effect an Insurance from loss by Fire , for Rs. 51,000 on the following Property viz. : One Pucca built and roofed bldg. (C. J. Vizandah...policy as and when it did. The learned Judge pointed out that the condition was a usual provision in a policy of fire insurance and an assurer cancelling the policy under that condition, need give no...

...mischief arises from fire in fire insurance cases and from perils of the sea in maritime insurance and the natural and almost inevitable consequence of that mischief is to create further mischievous...conduct of the Insurance Companies after the fire had been extinguished. Mr. Inverarity has before us attempted to show that what his client wants to do before the arbitrators is to prove that this latter...case, because the deterioration of machinery from neglect on the part of the Insurance Companies to take care of it is not an inevitable or direct consequence of the mischief by fire , It is only where...

...Yadav v. Oriental Fire & General Insurance Co. (1989) 4 SCC 128 while Mr Puri, learned counsel appearing for the contesting respondent-claimants, pitched his faith strongly on the earlier decision...indicate two distinct lines of cases . The first line of cases consists of fact situations wherein the insured are alleged to have committed breach of the condition of insurance policy, which required them...unlicensed drivers for being driven by the latter and which get involved in vehicular accidents by the driving of such unlicensed drivers. In such cases the insurance company cannot get benefit of the...

...trading receipt, then the sum. that is expended in that insurance is an allowable deduction. In the Gliksten Case the company were carrying on a timber merchant's trade. They had a policy of fire ... insurance . A fire took place, and the wood which they would have sold in the market was burned. The result was they were reimbursed the value of the timber by the insurance company. The timber was turned...into money, not by an ordinary sale in the market, but by the action of the fire and 'the payment of the insurance , and it was held that the money, which was now in the pockets of the timber...

...Machiavellian on Fire Insurance Law, in cases of reinsurance, representation made by the assured for the original insurance , and forming the basis of the original policy, may in turn be made the basis of the...-Barry's Fire Insurance , there is a passage to which Mr. Venkatarama Iyer drew our attention—“In order to render the reinsurance liable under a facultative reinsurance the liability of...reinsurance issued, by the respondent. The appellant a fire insurer and a limited company, had a branch in Colombo. A merchant in Colombo by name, Liyanage, insured with the appellant his electrical and...

...of Marine Insurance till 1907 when the Marine Insurance Act came into force. The general principles of the law of fire insurance in England are mostly derived from cases relating to marina ...This is a suit to recover a sum of Rs. 71,000 on a contract of fire insurance on certain cotton bales which were destroyed by fire at Lasoor on 23-4-1952.2. The plaintiff is...are an insurance company incorporated in New Zealand and have a branch office in Bombay. The parties were known to one another as the textile mills at Gadag were insured against risk of fire with the...

...short), which partially allowed the consumer complaint directing the Insurance Company to pay Rs. 6,57,55,155/- for a fire insurance claim with 9% interest from claim denial date within 8 weeks, or.../- to New India Assurance for safeguarding the custom bonded goods and for covering the risk against fire , etc.5. During the pendency of the insurance policies, on...14.03.2018, a fire broke out at the insured warehouse. The respondent then informed the Insurance Company and the Custom authorities about the same. The Insurance Company appointed M/s. J.C. Bhansali and Co...

...Chaudhuri, J.:— This is a suit instituted by the plaintiff company for the recovery of the sum of Rs. 9,333-5-1 for damages to their premises by fire . The proposal for insurance was made...assured had any information of the likelihood of a fire , when they applied for insurance . I do not think that there is any doubt whatsoever that they had such information at the time and believed that a... fire was likely. There is overwhelming evidence that before the date of their application for insurance their engineer, Mr. Meyer, had been informed by different persons that there was a strong...

...licence for such a purpose. 5. In j. C. Thompson v. Equity fire insurance company (1910 appeal cases 592) their lordships had to construe the precise signification of...the words "stored or kept". That was a case where thompson the owner of a building had insured against fire with the equity fire insurance co. The building was burnt down and the question was whether...the policy was avoided by the reason of the presence on the premises at the time of the fire of a small quantity of gasoline. The statutory condition which the insurance company relied on was that the...

...waive their right to demand immediate payment of the premium, and more especially in cases where a proposal is made in respect of a fire insurance policy. It is not always necessary that such a formal...every case a contract for insurance will not be binding unless the premium or a part thereof is paid. No such assumption can be made. There are cases in which it is open to the insurance company to...agreement should be entered into to constitute a valid contract of fire insurance . Where the insurance company on the receipt of a proposal for insurance issue a risk note covering the risk, that fact...

....3. On 4-12-1987 the appellant took out a Fire Policy C with the National Insurance Company, Respondent 1 in this appeal (subject-matter of OP No. 248 of 1997), in the account of Indian Bank...there was no response. Ultimately, on 21-3-1996 the Insurance Company replied to the legal notice, denying the factum of fire and refused to issue the “claim form” on the ground that the claim had become...Respondent 2 Bank was equally responsible to make a claim for the loss covered under the policy on account of the fire and as a matter of fact, it did lodge a claim with the Insurance Company as far back as...

...out;“Although the subject-matter may, in fact, have been destroyed by fire at the date of effecting the insurance , the contract may, nevertheless, in some cases be valid, and operate to...Chagla, C.J:—A rather interesting question relating to fire insurance arises on this appeal. The plaintiff insured colours and chemicals which were stored in a godown in...finding is that neither the plaintiff nor the insurance company knew on June 18, that the goods had been destroyed on June 16 by fire . The contention urged by Mr. Seervai before us is that looking to the...

...in these words: Bearing in mind as I have said that the object of a fire insurance is to insure against fire and that it is common knowledge that in many cases it is difficult, if not...Lord Justice Luxmoore:- On 13th November 1936, the appellant entered into a contract of insurance against loss or damage by fire with the respondent company in respect of...existed. It is stated in Welford and Otter Barry's Fire Insurance 3rd Edition, at page 64 that: The phrase 'civil commotion' is used to indicate a stage between a riot and civil war...

...1. This is a suit for recovery of Rs. 54,007/5/6 on a Policy of Fire Insurance on ??? of damage caused by fire to goods insured under that policy. The plaintiff carries on business as...and Rs. 10,000/- for the hosiery goods.3. On 17-6-1932 a further insurance against loss and damage by fire was effected in respect of his said business with Calcutta Divisional Office of...in respect of the said insurance . It was stipulated in the said Interim Note that the property of the plaintiff was thereby held insured against damage by fire , subject to the usual conditions of the...

...the date of fire accident.8. Since there was inordinate delay in settling the lawful claim under the fire insurance policy, the appellant preferred an original complaint...stock in the fire incident is illegal and shatters the confidence and trust of the people on the very purpose of insurance . It is further submitted that the National Commission despite upholding the...was bona fide and the fire was accidental had assessed the loss at Rs 1.70 crores, but the Insurance Company has repudiated the claim on frivolous ground, that too after a period of three years from the...

...completed policy of fire insurance dated March 15, 1951 and bearing No. 26625, and an unstamped letter of cover dated November 5, 1951, in respect of the same kind of insurance , issued by the respondent.... The letter of cover which bore the description ‘Interim Protection Note' provided that the appellant “Proposing to effect insurance against fire ... and having agreed to pay ... Tariff Premium thereon... Insurance is declined”. The fire on which the claim is based, occurred on the night of November 5, 1951 or during the early hours of the morning of the next day. It is not in dispute that the appellant...

...the usual fire insurance policies and similar clauses have come up for judicial consideration in a long list of cases . Mr. S. Roy referred me to some of these cases . It is enough if I refer to only...of the indemnification within the stipulated period and there seems to be a good deal of sense in it, particularly in the case of fire insurance or insurance against accident where the liability to the extent of the damage ...1. This is a suit on a policy of fire insurance . The plaintiff is a transport agent for forwarding goods by air and is a lessee of two godowns situate at premises Nos. 119 and 121, Motor...

...United India Fire & General Insurance Company v. Kalyani . 1983 A.C.J 29 Ker. contended that it was not open to...Supreme Court case British India General Insurance Co. v. Capt. Itbar Singh . 1958-1965 A.C.J 1 S.C. We’ also noted several cases of various High Courts following the...Supreme Court decision. In the light of United India Fire & General Insurance Co. v. Kalyani the respondents' objection is well-founded...

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Snippets of ten recent insurance judgments by the Supreme Court of India

As business operations seek to attain pre-pandemic levels of growth, insurance is one sector which could prove to be the pivot to sustainability.

Recent judicial interpretation rendered by Supreme Court to various principles of insurance law would prove to be a useful guide for both, Insurers/Insureds in matters relating to coverage.

What is the extent of jurisdiction of a Consumer Forum to examine a surveyor’s report?

Khatema Fibres Ltd. v. New India Assurance Company Ltd. and Ors. IV(2021)CPJ1(SC)

Policy type - Standard Fire and Special Perils

In the instant case, the Supreme Court observed that in cases where the insurance company admitted the insured’s claim, to the extent of the loss as assessed by the surveyor, the jurisdiction of the special forum constituted under the Consumer Protection Act, 1986 is limited. To establish deficiency, the insured should be able to establish, that the surveyor did not comply with the code of conduct in respect of his duties, responsibilities and other professional requirements as specified by the Regulations made under the Insurance Act, 1938. The Court finally held that a Consumer Forum which is primarily concerned with an allegation of deficiency in service cannot subject the surveyor's report to forensic examination of its anatomy. Once it is found that there was no inadequacy in the quality, nature and manner of performance of the duties and responsibilities of the surveyor, in a manner prescribed by the Regulations as to their code of conduct and once it is found that the report is not based on ad hocism or vitiated by arbitrariness, then the jurisdiction of the Consumer Forum to go further would stop.

Ingredients of a Marine Insurance Policy?

United India Insurance Co. Ltd. v. Levis Strauss (India) Pvt. Ltd. Civil Appeal No. 2955 of 2022

Policy type - Standard Fire & Special Perils Policy, Stock Throughout Policy, All Risks Policy

The Supreme Court in the course of its judgment, inter-alia , examined expressions under the Marine Insurance Act, 1973 (“MI Act”), namely, marine adventure, maritime peril referred to in marine adventure and marine policy. It was observed that Section 4 of the MI Act, deals with mixed marine and land risks. It inter-alia , enables coverage - through express terms, or by usage of trade - extension of marine policies so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage. The Supreme Court relied on its earlier judgment in New India Assurance Co. Ltd. v. Hira Lal Ramesh Chand and Ors. 2008 (10) SCC 626, where it was held that an insurance cover extending ' warehouse to warehouse ' meant that the consignments are covered by insurance not only during the sea journey, but beyond as stated in the policy i.e. during transit from the time it leaves the consignor's warehouse till it reaches the consignee's warehouse. In the instant case, since there was a warehouse-to-warehouse transit clause and certain other stipulations, which stated that the policy covers both marine and other risks, the policy was held to be a marine insurance policy which comprehensively covered voyage, transit, transportation and warehouse perils. What is material is not whether the insurable event occurred during the voyage; rather, the focus is on the nature of the cover.

Role of exceptions in an insurance policy?

Shivram Chandra Jagarnath Cold Storage and Ors.v. New India Assurance Company Limited and Ors. I(2022)CPJ138(SC)

Policy type - Deterioration of Stock Policy

In this case, the insurance claim of the Insured arose under a deterioration of stock policy which covered the stock of potatoes stored by the insured in cold storage. The surveyor observed that the claim should be rejected in view of exceptions to the policy. Thus, the insurer disclaimed any liability. The Supreme Court discussed the role of exceptions in an insurance policy, wherein it was opined that an insurer seeks to indemnify the insured only against such losses that are caused by certain perils arising under normal conditions whose effects are statistically estimated. The Court observed that exceptions are inserted to exempt the liability of the insurer for which it would be otherwise liable. Excepted clauses are inserted ex abundanti cautela in insurance policies to inform the insured that losses attributable to excepted causes will not be indemnifiable. Since the exception, in this case, was neither too wide nor in conflict with the main purpose of the insurance policy, the claim was held to be correctly repudiated by the insurer, having regard to the specific exceptions in the policy.

What is the rule of contra proferentem?

Haris Marine Products v. Export Credit Guarantee Corporation (ECGC) Limited Civil Appeal No. 4139/2020

Policy type - Single Buyer Exposure Policy

The Supreme Court delved into the term business common sense to interpret terms of a credit risk insurance policy. The Court relied on the UK Supreme Court’s judgment in Arnold v. Britton [2015] UKSC 36 and observed that the business common sense was a decisive method was suggested to construe the ambiguity of a term used in a commercial contract. On contra proferentem, the Court observed that an ambiguous term in an insurance contract is to be construed harmoniously by reading the contract in its entirety. If after that, no clarity emerges, then the term must be interpreted in favour of the insured, i.e., against the drafter of the policy. The Rule of contra proferentem thus protects the insured from the vagaries of an unfavourable interpretation of an ambiguous term to which it did not agree. Importantly, the Court emphasized the role of contra proferentem in standard form insurance policies, called contract d' adhesion or boilerplate contracts, in which the insured has little to no countervailing bargaining power. Accordingly, ECGC was held to have incorrectly interpretated an ambiguous term and was directed to pay the claim amount to the insured since the parties had transacted on several previous occasions.

Can reliance be placed on definition of words in specific statutes when the insurance policy itself defines those words?

Narsingh Ispat Ltd. v. Oriental Insurance Company Ltd. and Ors. Civil Appeal No. 10671 of 2016

Policy type - Standard Fire and Special Perils Policy

The insured had taken a Standard Fire and Special Perils Policy from the insurer. The policy covered the loss caused to the property of the insured on account of fire, lightning, explosion, riots, strike etc. A claim was lodged by the insured on account of 50-60 antisocial people with arms and ammunition, who entered the factory premises of the insured and caused substantial damage to factory, machinery and other equipment. According to the insured, the object of the incident was to terrorise the management of the insured. Insurer repudiated the insured’s claim by placing reliance on the exclusion clause in the policy regarding loss or damage caused by the acts of terrorism, which was defined under the policy. The Supreme Court held that the insurer had failed to discharge the burden of bringing the case within the four corners of the exclusion. When the policy itself defines the acts of terrorism in the exclusion clause, the terms of the policy being a concluded contract will govern the rights and liabilities of the parties. Therefore, the parties cannot rely upon the definitions of 'terrorism' in various penal statutes since the exclusion clause contains an exhaustive definition of acts of terrorism. Since the policy covers explicitly a liability arising out of the damage to the property of the insured due to riots or the use of violent means, therefore, there was no warrant for applying the Exclusion Clause. Accordingly, the Insurer’s decision to repudiate the policy was held to be unsustainable.

Whether there is any strait jacket formula for awarding compensation under the heads, pain and suffering and loss of amenities and happiness?

Sri. Benson George v. Reliance General Insurance Co. Ltd Civil Appeal No. 1540 of 2022

Policy type - Third Party Insurance

The Supreme Court examined its previous decisions in Raj Kumar v. Ajay Kumar and Anr. (2011)1SCC 343 and Lalan D. v. Oriental Insurance Company Limited (2020)9SCC 805, and observed that the amount of compensation to be awarded under the heads, pain and suffering and loss of amenities and happiness cannot be based on a straight jacket formula. It depends upon the facts and circumstances of each case and varies from person to person who has suffered due to the accident. So far as awarding compensation under the head pain, shock, and suffering is concerned, multiple factors are required to be considered namely, prolonged hospitalization, the grievous injuries sustained, the operations underwent and the consequent pain, discomfort and suffering. Similarly, loss of amenities and happiness suffered by the claimant and his family members also depend upon various factors, including the position of the claimant post accident, and whether, he is in a position to enjoy life and/or happiness which he was enjoying prior to the accident. The Court accordingly enhanced the compensation awarded to the claimant under the head loss of amenities and happiness.

What are the rules to be observed for making a proposal for insurance?

Manmohan Nanda v. United India Assurance Co. Ltd. and Ors. I(2022)CPJ20(SC)

Policy type - Overseas Mediclaim Policy-B

The Supreme Court while allowing an insurance claim of the insured under a mediclaim policy summarized the rules to be observed in making a proposal for insurance, namely, (a) a fair and reasonable construction must be put upon the language of the question which is asked, and the answer given will be similarly construed; (b) carelessness is no excuse, unless the error is so obvious that no one could be regarded as misled; (c) an answer which is literally accurate, so far as it extends, will not suffice if it is misleading by reason of what is not stated; (d) where the space for an answer is left blank, leaving the question un-answered, the reasonable inference may be that there is nothing to enter as an answer; (e) where an answer is unsatisfactory, as being on the face of it incomplete or inconsistent the insurers may, as reasonable men, be regarded as put on inquiry, so that if they issue a policy without any further enquiry they are assumed to have waived any further information; (f) a proposer may find it convenient to bracket together two or more questions and give a composite answer; (g) any answer given, however accurate and honest at the time it was written down, must be corrected if, up to the time of acceptance of the proposal, any event or circumstance supervenes to make it inaccurate or misleading.

Effect of delayed notification regarding theft of vehicle?

Jaina Construction Company v. The Oriental Insurance Company Limited and Ors. I(2022)CPJ119(SC)

Policy type - Motor Insurance Policy

The insurer repudiated the insured’s claim in toto on the ground that there was a delay in informing the insurance company regarding the theft of the vehicle. The condition in question mandated the insured to give immediate notice to the insurer of the accidental loss/damage but was given by the insured after a lapse of 5 months from the loss. Relying on Gurshinder Singh v. Shriram General Insurance Co. Ltd. and Anr. 2020 (11) SCC 612, the Supreme Court observed since the FIR was lodged immediately on the next day of the occurrence of theft of the vehicle by the insured and the vehicle could not be traced out, a delay of about five months in informing and lodging the claim with the insurer would not be fatal. The Court held that when the insurer has repudiated the claim only on the ground of delay, and the claim of the insured was not found to be not genuine, the insurer’s repudiation could not be sustained.

Duties of an insurer, when a policy holder seeks renewal of an existing policy?

Jacob Punnen and Ors. v. United India Insurance Co. Ltd. I(2022)CPJ87(SC)

Policy type - Medical Insurance Policy

The Supreme Court rejected the insurer’s argument that the consumer was under an obligation to inquire about the terms of the policy, and any changes that might have been introduced, in the standard terms. The state of the law as observed was that an insurer was under a duty to disclose any alteration in the terms of the contract of insurance, at the formation stage or as in this case, at the stage of renewal. The insurer cannot be heard to say that the insured was under an obligation to satisfy itself, if a new term had been introduced. In the facts of the case, the Court observed that medical or health insurance cover becomes crucial with advancing age; the policy holder is more likely to need cover; therefore, if there are freshly introduced limitations of liability, the insured may, if advised properly, and in a position to afford it, seek greater coverage, or seek a different kind of policy. Further, most policies - health and medical insurance policies being no exception, are in standard form. One who seeks coverage of a life policy/a personal risk, such as accident or health policy has little choice but to accept the offer of certain standard term contracts. Therefore, relying on the IRDA (Health Insurance) Regulations, 2016, the Court observed that it is the insurer's obligation to inform every policy holder, about any important changes that would affect her or his choice of product.

Can the Court adopt liberal interpretation while interpreting terms of the insurance policy?

Life Insurance Corporation of India and Ors. v. Sunita Life Insurance Corporation of India and Ors. (2022)1SCC68

Policy type - Life Insurance Policy under the Jeevan Suraksha Yojana

The accident claim benefit as per the terms of the insurance policy was payable only if the policy was in force on the date of the accident. In this case, the policy had lapsed at the time of accident and the premium was sought to be paid three days after occurrence of accident. However, the complainant contended that the premium was paid along with late fee charges and therefore, the policy had stood revived before the death of the complainant's husband. In rejecting the claim of the complainant, the Supreme Court relied upon its own decision in Vikram Greentech (I) Ltd. v. New India Assurance Co. Ltd. (2009) 5 SCC 599. In that case, the Court had observed that in a contract of insurance, there is requirement of uberrima fides i.e. good faith on the part of the insured. The four essentials of a contract of insurance are: (I) the definition of the risk, (ii) the duration of the risk, (iii) the premium, and (iv) the amount of insurance. Upon issuance of the insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of the risks covered by the insurance policy. Accordingly, the Court held that terms of insurance policy have to be strictly construed, and it is not permissible to rewrite the contract while interpreting the terms of the Policy.

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California’s Fire Insurance Crisis: Why it Happened and What Can Be Done To Fix It

Even as California’s wildfires grow more intense seemingly every year, insurers are cancelling policies for homeowners in the path of the fires.

California’s increasingly dangerous wildfire outbreak has led to another crisis, this one in fire insurance.   Jeff Turner / Wikimedia Commons   C.C. 2.0 Generic License -->

As the summer of 2021 turned to autumn, no fewer than 17 major wildfires burned in California, leaving more than 2.3 million acres scorched and destroying 3,289 homes and other buildings. As the victims of the state’s previous fires did, the owners of those homes would soon face a second crisis—how to rebuild their houses and their lives when faced with the combined obstacles of strict insurance company rules and local government red tape.

Those obstacles set off anger among Santa Cruz County homeowners who lost their houses in the 2020 CZU Lightning Complex Fire . Between Santa Cruz and San Mateo counties, that fire burned down 1,490 residential, commercial and other buildings, according to Cal Fire, damaging 140 others. At a Sept. 14 meeting of the Santa Cruz County Board of Supervisors, the property owners saw the board vote to remove one significant roadblock to rebuilding, only to replace it with what they saw as another.

A Fire Insurance Catch-22

Because insurance companies typically determine how much they will pay based on a homeowner’s costs incurred in rebuilding—costs that can be extremely difficult to determine—and they also impose deadlines for filing claims, wildfire victims are allowed only tight time limits on how long it takes them to rebuild. 

At the same time, Santa Cruz County requires homeowners to go through the same process as if they were building a new home from scratch. That includes contracting for costly and time-consuming “geologic evaluations,” that is, expert assessments of a property’s vulnerability to a wide range of natural calamities—not only wildfires.

But why should they, the Santa Cruz County homeowners wanted to know, be required to get a whole new set of evaluations for hazards that have nothing to do with wildfires? In August, the supervisors said that they would consider that question, and at the September meeting they agreed to waive the non-fire geologic requirements. On one condition.

Homeowners, the supervisors decided, must also sign an official document attesting that the non-fire-related geologic surveys were not done—even though those surveys in most cases were completed when the original homes were built. So the homeowners were allowed to skip the geologic studies, but required to sabotage the value of their own property to do it.

The convoluted Catch-22 now imposed on those Santa Cruz County homeowners appears emblematic of the traumas inflicted on wildfire survivors, and other Californians who happen to live in vulnerable areas, by insurance companies. In a rising number of cases, homeowners are simply denied insurance altogether. In the year 2019, insurers dumped the policies of approximately 230,000 homeowners. That was a 31 percent rise in policy cancellations from 2018, the industry’s response to absorbing $25 billion in losses from fire claims in 2018 and 2017. The fire-plagued Sierra Nevada region was hit particularly hard by policy cancellations, suffering 37,287 there in 2019. 

State Bans Policy Cancellations, But For How Long?

With the massive Dixie Fire leading the pack, having burned for 70 days and nearing 1 million acres, on Sept. 20 the state’s insurance commissioner, Ricardo Lara, slapped insurance companies with a one-year moratorium on cancelled fire policies. The ban applied to portions of 22 Northern California counties in areas affected by the Dixie and Caldor Fires as well as numerous other, smaller wildfires. 

Just one month earlier, Lara banned policy cancellations in areas of Plumas, Lassen and Siskiyou counties that had been hit by wildfire. The two bans combined to save about 350,000 homeowners from potentially losing their wildfire insurance for at least until 2022. Just a year earlier, Lara laid down moratoriums granting temporary protection to 2.4 million homeowners in fire-affected regions.

The moratoriums all have expiration dates. After they run out, all of those homeowners are back to square one with their insurance companies. Lara’s edicts do not address the skyrocketing cost of wildfire insurance. The state must approve insurance rates, and in 2017 and 2018 insurance regulators gave the green light to more than a billion dollars’ worth of rate hikes.

A 2017 report by the state’s Department of Insurance said that some policyholders saw annual rates jump from $800 to as much as $5,000 from one year to the next. They were hit with the devastating price increases despite, in some cases, going to the trouble and expense of upgrading the fire-resistance of their homes, a process known as “fire hardening.”

Tough 2008 Building Code Proves Effective Against Fire Damage

The state itself requires that newly constructed homes live up to high levels of fire protection. In 2008, California adopted a new, tough building code, known as code 7A , that requires all new homes in Wildland-Urban Interface (WUI) zones—that is, areas where residential housing comes right up against forests and other highly flammable types of vegetation—include fire-resistant roofs, interior sprinklers, non-flammable materials in decks and other attached structures, heat-resistant windows and other measures designed at minimizing fire vulnerability. 

The new code worked. After the deadly 2018 Camp Fire swept through Paradise, Calif., an analysis by the McClatchy news organization found that of the affected homes built after 2008—homes required to meet the new code requirements— 51 percent survived the blaze . Only 18 percent of the pre-2008 homes made it through the fire, which was California’s most destructive , taking out more than 18,000 structures.

So the 2008 regulations proved effective. Of course, the problem is, there just aren’t that many houses that have been built since 2008, compared to the number that predate the new code. The McClatchy study found just 350 homes in Paradise built under the 2008 code, and 12,100 from the pre-2008 era. And 2008 was also the year that the national and global economy nearly collapsed, leading to a prolonged recession and pronounced slowdown in the construction of new homes. 

The result? The vast majority of California homes in wildfire-prone areas remain defenseless. That means, once the state’s moratoriums expire, many will also be without insurance—a double crisis for homeowners.

Solutions to Fire Insurance Crisis Hard To Come By

In November of 2020, the “ free market environmentalist ” Property and Environment Research Center published a paper calling on California to deregulate the fire insurance industry , blaming the “unintended consequences” of the state’s control over insurance rates for the industry’s heavy losses after recent wildfires—leading the companies to boot thousands of homeowners off their client rosters. The resulting higher rates will give homebuilders “an incentive to invest in home-hardening efforts and develop in less risky areas,” the paper’s authors argued.

But that argument assumes that companies would actually offer lower rates for “hardened” homes. Current evidence suggests that might not be the case.

To make at least some headway in bringing the crisis under control, the Department of Insurance, Cal Fire and several other state agencies said in February 2021 that they were developing a single set of standards for home fire hardening in an attempt to cajole insurance companies into selling policies in areas most open to fire damage. 

While insurers have blamed the lack of hardening standards for their reluctance to reinstate policies for homeowners who take the often-expensive fire-resistance measures, they have also said that even when homeowners take the necessary steps, they still can’t insure them. Why? 

They say that they simply do not know how much the hardening process is worth, in dollars and cents. No expert doubts that home hardening reduces the risk of fire damage. But by how much? The research is not yet there to say with any certainty. That makes it tough for insurers to adjust their rates accordingly. At least, that’s what the insurance industry has said.

What solutions remain? The most obvious is also perhaps the least desirable—stop building houses in fire-prone areas. A 2014 study published in the academic journal Land Use Policy estimated that by the year 2050, 650,000 new homes will go up in “areas currently designated as ‘very high’ wildfire severity zones.”

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• Supreme court
• Fire Insurance | Exact Cause Of...

Fire Insurance | Exact Cause Of Fire Immaterial If Insured Was Not Responsible For Initiating Fire: Supreme Court

Suraj kumar.

28 Nov 2023 2:14 PM GMT

In a fire insurance claim, the Supreme Court recently held that the exact cause of the fire is immaterial if the insured is not implicated as the one responsible for initiating the fire. This principle, grounded in the Canara Bank v. United India Insurance Company (2020) 3 SCC 455 case reinforces the insurer's duty to honor the terms of the insurance policy and fulfill its obligations to...

In a fire insurance claim, the Supreme Court recently held that the exact cause of the fire is immaterial if the insured is not implicated as the one responsible for initiating the fire. This principle, grounded in the Canara Bank v. United India Insurance Company (2020) 3 SCC 455 case reinforces the insurer's duty to honor the terms of the insurance policy and fulfill its obligations to the insured.

The Court observed “ Therefore, it was unequivocally declared that the precise cause of a fire, whether attributed to a short circuit or any alternative factor, remains immaterial, provided the claimant is not the instigator of the fire. This case underscored the fundamental principle that an insurance company’s obligation to the insured is of much greater import….Moreover, the fire is found to have occurred within the insured warehouse and the appellant’s plea to the contrary is not believable. Therefore, it is a case of wrongful repudiation by the appellants.”

The judgment, steeped in the principles of good faith and trust inherent in insurance contracts, underscored the insurer's fiduciary duty, particularly when the insured is not found negligent.

It stated very eloquently “ In the realm of risk and uncertainty, individuals and organizations seek solace in the bastion of insurance – a covenant forged on the bedrock of trust. The trust serves as the cornerstone, forming the essence of the insurer-insured relationship. The fundamental principle is that insurance is governed by the doctrine of uberrima fides – there must be complete good faith on the part of the insured.

The heart & soul of an insurance contract lies in the protection it accords to those who wish to be insured by it. This understanding encapsulates the foundational belief that insurance accords protection & indemnification, preserving the sanctity of trust within its clauses. Effectively, the insurer assumes a fiduciary duty to act in good faith and honor their commitment. This responsibility becomes particularly pronounced when the insured, in their actions, have not been negligent. In light of the vital role that trust plays in insurance contracts, it is important to ensure that the insurer adequately fulfills the duty that has been cast on it, by virtue of such a covenant.”

The Supreme Court bench comprising Justices Hrishikesh Roy and Justice Sanjay Karol was hearing an appeal against NCDRC directing the Insurance Company to pay more than 6 crores for a fire insurance claim with 9% interest from the claim denial date within 8 weeks, or face 12% interest beyond the stipulated 8 weeks

The case revolved around a fire that broke out on 14.03.2018, at a warehouse covered by an insurance policy with the claimant having paid Rs. 44,02,562/- for coverage against fire and safeguarding custom bonded goods. Various investigations were conducted, and 7 of the reports suggest short-circuiting as the cause of the fire. However, the forensic investigation report determined that a short-circuit was not the cause; rather, sparks from rooftop welding work may have triggered the fire. The surveyor’s report from M/s. Bhansali & Co. also aligned with such a conclusion.

On 03.10.2018, the insured raised a claim for a sum of Rs. 6,57,55,155/. But, the Insurance Company rejected the claim on 15.07.2019, citing reasons such as the insured premises at Survey No. 9/3 were not affected by the fire and the alleged negligence during roof construction, which increased the risk and voided the insurance coverage under Clause 3 of the policy's terms and conditions.

Unsatisfied with the repudiation of the claim, the respondent filed a consumer complaint. The NCDRC ruled in favor of the claimant and held that the insurance policy covered the complainant's warehouse and that the roofing work did not significantly increase the risk, making Clause No. 3 inapplicable. It highlighted that the approved surveyor's report, while important, is not absolute and not binding on the parties, relying on the case of New India Assurance Co. Ltd. vs. Pradeep Kumar.

New grounds for repudiation cannot be introduced during the hearing if they were not included in the repudiation letter

The Court referred to earlier cases such as Galada Power and Telecommunication Ltd. vs. United India Insurance Co. Ltd . (2016) 15 SCC 161 and Saurashtra Chemicals Ltd. vs. National Insurance Co. Ltd. (2019) 19 SCC 70, where it was firmly established that new grounds for repudiation cannot be introduced during the hearing if they were not explicitly mentioned in the repudiation letter.

Further, the court examined the location of the fire, policy documents, the Leave & License Agreement, and communications from various departments. It concluded that the insured premises at Survey No. 9/3 was covered by the insurance policy.

Essential repair works by insured won’t amount to an alteration increasing risk of loss or damage to deny claim

The Court scrutinized Clause 3(a) of the insurance policy, which says the policy won’t apply if “there is an increased risk of loss or damage to the insured premises or goods within it.”

In the present case, the insured had undertaken repairs on the rooftop to prevent water leakage to the warehouse.

The court held that “ such essential repair work on the rooftop by itself, cannot be reasonably construed to be an alteration that would increase the risk of loss or damage.”

outlines circumstances under which the policy would cease to be applicable. It specifically addressed the repair work undertaken on the rooftop to prevent water leakage, asserting that such essential repairs did not constitute an alteration increasing the risk of loss or damage.

Significant time gap between repair work and fire, no negligence by insured

The Court referred to varying conclusions in various reports regarding the cause of the fire. While seven reports suggested a short circuit, the forensic investigation report pointed to sparks from rooftop welding work.

The Court questioned the logic of the forensic investigator's conclusion, pointing out a significant time gap between the welding work and the fire. The Court emphasized that the evidence did not support negligence on the part of the insured.

The surveyor’s report in insurance claims is not sacrosanct and binding

The court highlighted the significance of a surveyor's report in insurance claims, citing the Insurance Act of 1938. The Act mandates that claims exceeding Rs. 20,000 must undergo an initial assessment by an approved surveyor.

However, the Court emphasized that while the insurer has the discretion to settle the claim for a different amount, the surveyor's report is not a conclusive and binding document

The Court referred to New India Assurance Co. Ltd. v. Pradeep Kumar (2009) 7 SCC 787 which observed that “ It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor’s report may be the basis or foundation for the settlement of a claim by the insurer in respect of loss suffered by the insured but such report is neither binding upon the insurer nor insured.”

In the present case, the court found that the surveyor's report, although comprehensive, was inconclusive regarding the actual cause of the fire.

Claimant neither importer nor owner but merely custodian of goods: Insurance claim can include customs duty

The next issue was about the inclusion of customs duty, amounting to 2 crores in the insurance claim filed by the insured. The appellant contended that customs duty should not be part of the claim, citing the Customs Act, 1962, which specifies that only the importer is liable to pay customs duty. He argued that since no bills of entry were filed, and no assessed goods were lost in the fire, there is no customs duty liability.

However, the court agreed with the claimant who argued that Sections 22 and 23 of the Customs Act, which grant privileges related to abetment and remission, apply exclusively to 'importers' of insured goods. The claimant, functioning as a custodian, neither assumes the role of an importer nor owner of the goods but acts solely as a trustee on behalf of their clients.

This distinction became crucial in establishing the claimant's right to include customs duty in the insurance claim.

In light of the above, the Court dismissed the appeal of the Insurance Company. The customs duty component of the claim was directed to be paid to the Customs Department directly.

Case title: New India Assurance Co Ltd v. M/S Mudit Roadways

Citation: 2023 LiveLaw (SC)

For Appellants: Adv. Aditya Kumar

For Respondent: Sr Adv. Mr. Mrinal Kumar Choudhury and Adv. Parthiv K. Goswami

Click Here To Read/Download Judgment 

Fire insurance claim examples

Published January 13, 2021

Read time 3 mins

Find in this article:

In 2018/19, more than 36,000 homes across the UK were impacted by fire , a figure which serves as a stark reminder of just how vulnerable homeowners are to the threat of fire. 

In the immediate aftermath of a house fire, homeowners will face a number of critical decisions that could impact the outcome of their insurance claim. From preparing evidence to negotiating with loss adjusters , insurance claims can be incredibly stressful.

Having a Loss Assessor on your side can alleviate this stress and significantly increase the chances of receiving the full settlement entitled to you under the terms of your insurance policy. 

To illustrate this, we’ve compiled below some examples of fire insurance claims that Morgan Clark has successfully managed on behalf of its clients.

Fire insurance claim example 1: Cottage fire in Cambridge 

Mr and Mrs Hampshire suffered a fire at their thatched cottage in Cambridge after a lighter ignited in the middle of the night and quickly escalated. The fire service attended the scene and quickly extinguished the flames, however, the fire officer recommended a structural survey should be undertaken to check for damage to the roof. 

Mr and Mrs Hampshire appointed Morgan Clark to manage their insurance claim, which ensured the couple received fair compensation. There were initial concerns that the claim may not be covered due to conditions within the policy, but Morgan Clark provided adequate documentation for the claim to be accepted.

Morgan Clark, working alongside its team of building specialists, restored the property to a better than pre-fire condition. The family were also placed into alternative accommodation and received a large disturbance allowance payment while the restoration work took place. 

The final settlement was agreed at circa £100,000, which Mr & Mrs Hampshire were very happy with.  Read the full case study here .

Fire insurance claim example 2: Extensive damage to North Yorkshire home

Mr and Mrs Hall’s 4-bedroom home suffered extensive damage after a fire, caused by an electrical fault, engulfed the property. It took eight fire engines six hours to extinguish the flames, by which point the roof was completely gone.

Faced with a “very daunting and arduous” insurance process, Mr and Mrs Hall turned to Morgan Clark for help.

Morgan Clark took over the claim on behalf of the client and alongside Bedfords, a national firm of chartered building surveyors, prepared a schedule of work on the severely damaged property. 

With Morgan Clark leading the claim, Mr and Mrs Hall received a damage settlement of circa £185,000 and a second cash settlement of circa £50,000 for contents. The final settlements far exceeded the client’s expectations.

Read the full case study here . 

Fire insurance claim example 3: Underinsurance house fire claim

After experiencing a fire at his Somerset home, Mr Schroder faced underinsurance of 66%, which his insurance provider proposed applying to the settlement of the claim. Concerned with the prospect of dealing directly with his insurer, Mr Schroder contacted Morgan Clark for help, who promptly stepped in to manage the claim on his behalf. 

Morgan Clark liaised with the Loss Adjuster and a Chartered Surveyor was appointed, who prepared a schedule of work. Following an initial survey on the property, an agreement for underinsurance at 76% was reached. Morgan Clark felt this settlement was inadequate so instructed a second survey, which highlighted a more satisfying figure of underinsurance at 90%. 

The insurance company refused to award more than 76% underinsurance, so the claim was referred to the Ombudsmen for a final decision.

Mr Schroder accepted a cash settlement at a rate of 76% underinsurance for repairs while awaiting a decision from the Ombudsman. Meanwhile, Morgan Clark continued to liaise with the Ombudsman on behalf of Mr Schroder and eventually negotiated an underinsurance figure of 90%.

The final claim was agreed at circa £23,000 for contents and a further circa £320,000 for repairs – a result that Mr Schroder was very happy with. 

If you have experienced a fire at your home, Morgan Clark can help. Contact us today or visit our fire insurance claims page for more information. 

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Read about Five recent insurance related litigations in the Supreme Court

• August 14, 2024
• securenow_insuropedia

Five recent insurance related litigations in the Supreme Court and What They Mean for Policyholders

I. Claims can be rejected if material information is not disclosed when buying insurance

Reliance Life Insurance v. Rekhaben Nareshbhai Rathod – Supreme Court litigation

This case was about a basic principle of insurance law: if the insured does not reveal important information when signing an insurance contract, the insurer can reject policy claims.

In this case, Mrs Rathod’s spouse had bought life insurance from Reliance Life Insurance in September 2009. However, Mrs Rathod had taken a life insurance policy from Max New York Life Insurance Co. Ltd. in July 2009. Reliance. After the death of her spouse, Mrs Rathod made a claim under the policy in February 2010. While Reliance was making a decision on this claim, Max informed it of the previous insurance. Because Mrs Rathod had not revealed this information, Reliance rejected her claim.

The District Commission dismissed Mrs Rathod’s complaint because of her failure to disclose information. However, both the State and National Commissions allowed the appeal noting that “the omission of the insured to disclose a previous policy of insurance would not influence the mind of a prudent insurer . ” In appeal, the Supreme Court (SC) reversed this decision. It noted that not disclosing insurance obtained earlier was the suppression of a material fact, which would allow Reliance to reject the claim. Giving a wrong answer or not revealing important facts in the proposal form cancels the policy since it goes against “good faith”.

II. Insurance company must provide all reasons for rejecting a claim in the initial rejection letter

Branch Manager, Bajaj Allianz Life Insurance Company Ltd. and Ors. Dalbir Kaur

The SC set aside a verdict from the National Consumer Disputes Redressal Commission (NCDRC) in this case. It noted that an insurance contract is of “utmost good faith” and anyone who wants life insurance must disclose all important facts. The NCDRC had dismissed Bajaj Allianz’s plea against an order asking it to pay a full death claim with interest to the mother of the deceased. The SC bench headed by Justice D. Y. Chandrachud was hearing a plea by Bajaj Allianz against this NCDRC verdict.

The SC noted that a proposal form specifically asks about pre-existing conditions to help the insurer evaluate risk. The proposer had not revealed that he was suffering from a pre-existing illness and was vomiting blood barely a month before the issuance of policy. Alcohol abuse had caused his pre-existing ailment. The insurer did not have these details. The court decided to set aside NCDRC judgement as it did not lay down the correct principle of law.

The insured person’s mother was 70 years old and had lost the support of her son. Considering this, the court used its jurisdiction under Article 142 of the Constitution to not to recover the paid out amount.

III. Unless the insured is duly informed, exclusionary clauses are not applicable

Supreme Court ruling on Litigation in case- Saurashtra Chemicals Ltd . v.  National Insurance Co. Ltd.

Saurashtra Chemicals bought a standard fire and special perils policy from National Insurance for the coal and lignite in its factory compound. It paid an additional premium to cover the risk of loss to the stock from spontaneous combustion.

The Sick Industrial Companies Act had declared Saurashtra Chemicals  a sick unit. They had closed the factory from 17 February 2006 to 9 August 2006. It reopened on 10 August 2006. Between 11 August and 20 August 2006, a spontaneous combustion destroyed some coal and lignite . National Insurance received a notice of the loss and damage. A surveyor assessed the total loss at Rs. 63,43,679.

However, National Insurance rejected the claim saying there was no loss as specified in the policy because spontaneous combustion had not resulted in a fire.

Saurashtra Chemicals then filed a consumer complaint before the NCDRC. National Insurance responded stating:

• No claim could be paid since the loss by spontaneous combustion was not covered.
• Since Saurashtra Chemicals had closed the factory for almost 6 months, the insurance cover ceased to operate. The policy stated that insurance would end if the building that had the insured property was unoccupied for more than 30 days.
• Delay in claim by more than 30 days, violating condition no. 6(i) of the policy’s general conditions.

The NCDRC did not accept the first and second reasons. However, it found the third reason valid. It dismissed the complaint on breach of condition No. 6(i) of the policy since the insured did not submit the notice of the loss in writing within 15 days of the incident.

Saurashtra Chemicals filed an appeal in the SC. The SC noted that the rejection letter did not mention the delay as a reason for rejection. National Insurance first mentioned the delay in its reply before the NCDRC. Therefore, SC allowed Saurashtra Chemicals’ appeal.

New India Assurance Co. Ltd. v. Paresh Mohanlal Parmar- Supreme Court ruling

Mr Parmar bought a burglary and housebreaking insurance policy for 5 June 2003 to 4 June 2004 from New India Assurance for Rs. 20 lakh. During this period, there was a theft in Mr Parmar’s warehouse. He reported the theft to the police and shared the information with New India Assurance. Their surveyor visited and submitted his preliminary report. New India Assurance claimed there was no forced entry because a duplicate key had been used to open the warehouse. It rejected the claim.

The State Commission dismissed Mr Parmar’s complaint. He then went to the NCDRC. It noted that the warehouse lock was found on the street and the culprit had been convicted under Section 454 IPC. Thus, it ruled that the culprit had forced open the warehouse . It also found that New India Assurance had not made Mr. Parmar aware of the relevant terms and conditions of the policy.

New India Assurance filed an appeal in the SC. Mr Parmar argued that he had not been provided with the policy’s terms and conditions. Thus, they could not reject his claim. The SC could not find any evidence to the contrary. It noted that the insurer(s) had to prove that the insured was aware of the policy’s terms and conditions when the insurer issued the policy. The SC thus supported the NCDRC order to pay the claim.

IV. Determining whether the insured is a regular employee and the use of the contra proferentum rule

Sushilaben Indravadan Gandhi and Anr. v. New India Assurance Co Ltd and Ors.

A doctor travelling in a hospital vehicle died in an accident caused by the driver’s carelessness. The hospital’s arrangement was that New India Assurance would pay compensation for those not employed by the hospital. Workmen Compensation Act, 1923 covered the employees. The main issue, in this case, was whether the doctor was a hospital employee.

The SC first examined the hospital contract. Was it a “Contract for Service,” which suggests a relationship between equals on professional terms, or “Contract of Service,” which implies a master-servant relationship? The SC ruled that the they could not treat the doctor as a regular hospital employee. His contract clearly showed that his services were provided as an independent professional. The SC thus applied the contra proferentem  principle. This states that the exclusion clause must be read against the insurer. The SC thus allowed compensation of INR 37.6 lakh to the appellants.

The SC thus clarified the position on ambiguous policy, where the contra proferentem rule will be applied. In cases of ambiguity in the policy wording, the ruling would be against the party that has prepared the contract; in most cases, this is the insurance company.

The SC also made it clear that doctors must be considered professionals. Their terms of service were different from those of general hospital employees.

In conclusion, the five recent insurance-related litigations in the Supreme Court serve as significant reminders of the complexities and nuances within the insurance industry. These cases shed light on the importance of comprehensive policy interpretation, diligent claims handling, and adherence to contractual obligations. By closely studying these rulings on five recent insurance related litigations in the Supreme Court, insurers and policyholders can gain valuable insights into potential pitfalls, mitigating risks, and fostering a stronger foundation for fair and effective insurance practices.

Written By- CGL

Ritesh Garg

MBA Insurance and Risk

Ritesh is a distinguished writer specializing in articles on Commercial General Liability (CGL) insurance for SecureNow. Leveraging 7 years of experience in the field, he possesses a thorough understanding of the intricacies and nuances of CGL policies. His articles delve into various aspects of CGL insurance, providing readers with valuable insights into liability coverage for businesses and risk mitigation strategies. Renowned for their expertise and clarity, Ritesh is dedicated to delivering informative and engaging content that empowers businesses to protect themselves against potential liabilities and risks.

Last Updated on August 14, 2024 by Chetan Sharma

Principle of Indemnity in Fire Insurance: A Critical Analysis

• Devina Srivastava

Fire insurance means insurance against any loss caused by fire. Fire insurance has no direct relation to saving but is always a question of indemnity for property. The principle of indemnity, which arises under common law, ensures that the insured does not recover more than actual loss suffered by him/her. The principle of indemnity gives rise to the principles of subrogation and contribution which ensure that an insured does not gain under the insurance contract. The application of these principles to a contract of fire insurance raises imminent questions about concepts such as policy coverage or depreciation, status of salvage value, underinsurance and limited interest. A Standard Fire and Special Perils Policy must be discussed in the light of these nuances. Thus, the purpose of this paper is to provide a clear picture as to the nature and purpose of fire insurance by studying the application of principle of indemnity and incidentally, the principles of subrogation and contribution to a contract of fire insurance. The discussion leads to results which help in understanding the settled position taken by courts regarding the aspects of fire insurance contract. Further, based upon the discussion, ways and methods have been recommended to resolve the studied issues and make the fire insurance regime in India more efficient and efficacious. The paper has value for all stakeholders, especially insurance companies and its customers as its ultimate aim is to help in eliminating uncertainty in fire insurance contract which would help both, insured and insurer, in better implementation of a fire insurance contract.

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What are the Features & Benefits of Fire Insurance?

Table of contents.

In a rapidly evolving world, where uncertainties are a part of life, mitigating potential risks has becomes a top priority for individuals and businesses alike. One such risk that can wreak havoc is a fire outbreak. Fires can erupt suddenly and spread rapidly, causing extensive damage to property, assets, and even lives. This is where fire insurance policies step in, offering a safety net against the financial devastation caused by fire-related disasters. In India, a country prone to various types of fire hazards, understanding the types, features, and benefits of fire insurance policies is crucial.

Read More: 5 Easy Steps to Claim Fire Insurance

Features of Fire Insurance

Fire insurance policies come with a range of features tailored to meet the diverse needs of policyholders. Understanding these features can help individuals and businesses make informed decisions when selecting an appropriate fire insurance policy.

Property Coverage: Fire insurance policies primarily provide coverage for damage or loss to property caused by fire and allied perils. These perils may include lightning, explosion, riot, strike, malicious damage, and impact damage.

Scope of Coverage: Fire insurance policies can cover various types of properties, such as residential buildings, commercial spaces, industrial premises, and even movable assets like machinery, equipment, and furniture.

Valuation of Property: Insured property can be valued based on either its replacement value or its market value. Replacement valve covers the cost of replacing the damaged property with new items of the same kind and quality, while market value accounts for depreciation.

Premium Determinants: The premium for a fire insurance policy is influenced by factors like the type of property, its location, construction material, occupancy, fire prevention measures in place, and the sum insured.

Add-On Covers: Policyholders can enhance their coverage by opting for add-on covers. These might include coverage for consequential losses, additional expenses incurred during reconstruction, and coverage for specific perils like earthquake or flood.

Deductibles and Limits: Fire insurance policies often come with deductibles, which are predetermined amounts that the policyholder must bear before the insurer starts covering the loss. Policies also have coverage limits, beyond which the insurer might not compensate for losses.

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Benefits of Fire Insurance

Investing in a fire insurance policy offers a multitude of benefits that go beyond mere financial compensation in the event of a fire-related disaster.

Financial Protection: The primary benefit of fire insurance is the financial shield it provides against unforeseen property damage or destruction caused by fires. This coverage ensures that the policyholder does not face crippling financial losses.

Reconstruction and Replacement: In case of damage, the policyholder can use the insurance payout to repair or reconstruct the property, facilitating a quicker recovery and minimizing business downtime.

Peace of Mind: Fire insurance policies bring peace of mind to property owners, reducing anxiety about potential losses and enabling them to focus on their daily activities without constant worry.

Business Continuity: For businesses, fire insurance is a lifeline. It helps maintain business continuity by covering not only the cost of repairs but also the potential loss of income during the period of interruption.

Legal Compliance: Many lenders and landlords require individuals and businesses to have fire insurance coverage as a prerequisite for loans or leases. It helps fulfill legal and contractual obligations.

Risk Mitigation: Fire insurance encourages property owners to implement fire prevention measures, as insurers often provide discounts for properties equipped with fire safety systems.

Weighing the Pros and Cons

Fire insurance is a critical safeguard for homeowners and businesses. It offers financial protection against fire damage. Understanding its advantages and disadvantages is key to making an informed decision.

Advantages of Fire Insurance

Financial Protection: The primary benefit. It covers the cost of repair or reconstruction after a fire. This protection is invaluable. It saves you from potentially crippling expenses.

Peace of Mind: Knowing you're covered brings peace of mind. In the event of a fire, you won't face financial ruin. This assurance is significant. It lets you focus on recovery, not expenses.

Coverage for Contents: Not just the structure, but also the contents. Furniture, electronics, and personal items can be covered. This comprehensive coverage is a major advantage.

Liability Protection: Some policies offer liability coverage. If the fire spreads and damages neighboring properties, you're covered. This aspect is often overlooked but crucial.

Additional Living Expenses: If a fire makes your home uninhabitable, insurance can cover living expenses elsewhere. This benefit is a lifesaver during rebuilding or repairs.

Disadvantages of Fire Insurance

Cost : Premiums can be high, especially in fire-prone areas. This cost is a significant consideration for many.

Complexity of Policies: Understanding policy details can be challenging. Terms and conditions, exclusions, and deductibles can be complex. This complexity can lead to misunderstandings about coverage.

Claims Process: Filing a claim can be a lengthy and complicated process. Delays and disputes over the value of damages can be frustrating.

False Sense of Security: Over-reliance on insurance can lead to negligence. It's important to maintain fire safety practices even with insurance.

Exclusions: Not all types of fire damage may be covered. For example, fires due to natural disasters or wars might be excluded. Understanding these exclusions is crucial.

Fire Insurance Claim Examples

The process of filing a fire insurance claim involves several steps, including notifying the insurer, providing documentation, and cooperating with the claims adjuster. Here are a couple of examples illustrating how fire insurance claims work:

1. Residential Property Fire

Suppose a homeowner named Sarah experiences a fire outbreak in her house due to an electrical short circuit. The fire causes significant damage to her property, including furniture, appliances, and structural elements. Sarah had opted for a fire insurance policy with replacement value coverage.

Notifying the Insurer: As soon as the fire is under control, Sarah contacts her insurance company to report the incident and initiate the claims process.

Claim Documentation: Sarah provides photographs of the damaged property, an estimate of the replacement cost, and a detailed inventory of the items destroyed in the fire.

Claims Adjuster Visit: The insurance company sends a claims adjuster to assess the damage and verify the provided documentation.

Claim Settlement: Once the claims adjuster verifies the loss, the insurer approves the claim. Sarah receives compensation based on the replacement value of the damaged items. She uses this payout to replace the damaged furniture and appliances, effectively restoring her home.

Also Read: Group Term Life Insurance Policy for Employees in India

2. Commercial Property Fire

Consider a scenario where a restaurant owner named Raj operates a successful eatery. Unfortunately, a kitchen fire breaks out due to a faulty gas line, resulting in severe damage to the restaurant's interiors, equipment, and inventory.

Notifying the Insurer: Raj informs his insurance company about the fire incident and begins the claims process.

Loss Assessment: The insurer reviews Raj's policy to understand the extent of coverage and sends a surveyor to assess the damage.

Business Interruption Coverage: Raj's policy includes business interruption coverage. This feature compensates him for the income lost during the period the restaurant remains closed for repairs.

Documentation Submission: Raj submits documentation, including repair estimates, inventory records, and financial statements detailing the business's earnings before the fire.

Claim Approval: Once the insurer reviews the documentation and assesses the loss, they approve the claim. Raj receives a payout that covers the cost of repairs, replacement of damaged equipment, and compensation for the income lost during the closure.

Fire insurance policies in India serve as a crucial tool for individuals and businesses to safeguard their valuable assets against the unpredictable threat of fire-related disasters. By understanding the features, benefits, and claims process associated with fire insurance, policyholders can make informed choices and ensure that they have a robust safety net in place. As fires continue to pose a significant risk, investing in fire insurance is not just a financial decision but a strategic move to ensure stability and resilience in the face of adversity. With the right fire insurance policy, individuals and businesses can navigate the challenges of fire outbreaks with confidence, knowing that they have a partner to help them rebuild and recover.

Frequently Asked Questions

1. What specific measures can property owners take to prevent fires and potentially lower their fire insurance premiums?

Install smoke alarms and fire extinguishers.

Regularly maintain electrical systems and gas lines.

Provide fire safety training for employees.

Follow proper storage practices for flammable materials.

Use fire-resistant building materials.

2. Are there any special considerations for insuring historic properties or heritage sites against fire damage?

Appraise historical properties accurately considering their value and restoration costs.

Customize coverage to protect unique architectural elements and artifacts.

Demonstrate ongoing conservation efforts and fire prevention measures.

Collaborate with historical preservation experts and insurers.

3. How does fire insurance differ from other property insurance policies, such as homeowner's insurance or commercial property insurance?

Fire insurance specifically covers fire-related damages .

Homeowner's and commercial property insurance offer broader coverage for various perils.

Fire insurance can be customized with specific endorsements.

Commercial property insurance often includes business interruption coverage.

4. How can policyholders expedite the claims process for fire insurance in India?

Policyholders can speed up the claims process by immediately notifying the insurer after a fire, submitting complete and accurate documentation promptly, and maintaining clear communication. They should also prepare an inventory of damaged items and provide all required evidence without delay. Quick and thorough action ensures faster claim resolution.

5. What are the common reasons for the denial of fire insurance claims in India, and how can policyholders avoid these pitfalls?

Claims might be denied due to inaccuracies in the claim form, insufficient documentation, or failure to disclose relevant information. Policyholders can avoid these issues by thoroughly reviewing their policy terms, ensuring all information is accurate and complete, and submitting all required documents. Understanding policy exclusions and conditions also prevents misunderstandings that could lead to denial.

6. Can fire insurance policies in India be transferred to a new owner if the insured property is sold, and if so, what is the process? ‍

Yes, fire insurance policies can be transferred to a new owner when the insured property is sold. The process involves notifying the insurer about the sale, submitting a transfer application, and providing the new owner's details. Both parties must agree to the transfer. The insurer will then assess the application and, if approved, update the policy to reflect the new ownership. This ensures continuous protection for the property under its new owner.

La Crema: A Case Study of Mutual Fire Insurance

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An Assessment of the Awareness of Fire Insurance in the Informal Sector: A Case Study of Kumasi Central Market in Ghana

• Leo Moses Twum-Barima
• Published 2014
• International Journal of Economics and Empirical Research

Tables from this paper

14 Citations

Determination of active protection measures against fire in wuse market of the federal capital territory of nigeria, fire safety preparedness in the central business district of kumasi, ghana.

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Perceptions of Home and Small Business Owners on Insurance in Accra, Ghana

Reviewing fire disasters at traditional markets: causes, impacts, and remedies, trend of fire outbreaks in ghana and ways to prevent these incidents, business risk exposure: evidence from informal market traders in ghana, improving fire risk communication between authorities and micro‐entrepreneurs: a mental models study of ghanaian central market fires, women's occupational health and safety in the informal economy: maternal market traders in accra, ghana, assessing the impact of fire safety training at a university’s information and communication technology unit, microenterprise performance amidst environmental turbulence and resource scarcity: an integrated capital approach, 10 references, the demand for micro insurance in ghana, modern advanced accounting, commerce for west africa.

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