Fire Insurance Under Indian Insurance Law



A contract of Insurance comes into being when a person seeking insurance coverage enters into a contract with the insurer to indemnify him against loss of property by or incidental to fire and or lightening, explosion, etc. This is faulty a contract and thus as is ruled by the general law of contract. Although, it has certain special facets as insurance transactions, such as utmost faith, insurable interest, indemnity, subrogation and contribution, etc. these concepts are average in all insurance contracts and are ruled by special standards of law.

FIRE INSURANCE:

According to S. 2(6A), "fire insurance business" means the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other Incidence, customarily blanketed among the disadvantages insured against in fire insurance business.

According to Halsbury, it is a contract of insurance by which the insurer has the same opinion for consideration to indemnify the assured up to a certain extent and subject to certain terms and situations against loss or damage by fire, which may occur to the property of the assured during a specific period.
Thus, fire insurance is a contract wherein the person, seeking insurance Insurance policy, enters into a contract with the insurer to indemnify him against loss of property by or incidental to fire or lightning, explosion etc. This policy is designed to insure one's property and other items from loss happening due to complete or partial damage by fire.

In its strict sense, a fire insurance contract is one:

1. Whose standards object is insurance against loss or damage occasioned by fire.

2. The extent of insurer's liability being limited by the sum assured and not essentially by the extent of loss or damage sustained by the insured: and

3. The insurer having no interest in the protection or destruction of the insured property apart from the liability undertaken under the contract.

LAW GOVERNING FIRE INSURANCE

There is no statutory enactment governing fire insurance, as in the case of marine insurance which is regulated by the Indian Marine Insurance Act, 1963. the Indian Insurance Act, 1938 faulty dealt with law of insurance business as such and not with any general or special ideas of the law relating fire of other insurance contracts. So also the General Insurance Business (Nationalization) Act, 1872. in the absence of any legislative enactment on the subject , the courts in India have in dealing with the topic of fire insurance have relied so far on judicial decisions of Courts and opinions of English Jurists.

In identifying the value of property damaged or destroyed by fire for the purpose of indemnity under a policy of fire insurance, it was the value of the property to the insured, which was to be measured. Prima facie that value was measured by reference of the market value of the property before and after the loss. Youngsters such method of overview was not relevant in instances where the market value did not represent the real value of the property to the insured, as where the property was used by the insured as a home or, for wearing business. In such Instances, the measure of indemnity was the cost of reinstatement. In the case of Lucas v. New Zealand Insurance Co. Ltd.[1] where the insured property was bought and held as an income-producing investment, and thus the court held that the proper measure of indemnity for damage to the property by fire was the cost of reinstatement.

INSURABLE INTEREST

A person who is so interested in a property as to have advantage from its life and prejudice by its destruction is noted to have insurable interest in that property. Such a person can insure the property against fire.

The interest in the property have to exist each at the inception as well as at the time of loss. If it does not exist at the graduation of the contract it can not be the subject-matter of the insurance and if it does not exist at the time of the loss, he suffers no loss and exhibit no indemnity. Thus, where he sells the insured property and it is damaged by fire thereafter, he suffers no loss.

DISADVANTAGES COVERED UNDER FIRE INSURANCE POLICY

The date of conclusion of a contract of insurance is issuance of the policy is alternative from the popular or assumption of risk. Phase 64-VB only lays down extensively that the insurer can't assume risk prior to the date of receipt of Top class. Rule Fifty eight of the Insurance Law, 1939 speaks about advance charge of charges in view of sub phase (!) of Part 64 VB which permits the insurer to assume the risk from the date onwards. If the proposer did not want a particular date, it was possible for the proposer to negotiate with insurer about that term. Precisely, as a result the Apex Court has stated that final attractiveness is that of the assured or the insurer depends easily on the way in which negotiations for insurance have Improved. Though the following are hazards which seem to have covered Fire Insurance Policy but are not soak up covered under the Policy. Some of contentious social gathering are as follows:

FIRE: Destruction or damage to the property insured by its own fermentation, herbal heating or spontaneous combustion or its present process any heating or drying system can't be handled as damage due to fire. For e.g., paints or chemical substances in a factory present process heat remedy and subsequently damaged by fire is not covered. Further, burning of property insured by order of any Public Authority is excluded from the scope of cover.

LIGHTNING : Lightning may result in fire damage or other types of damage, such as a roof broken by a falling chimney struck by lightning or cracks in a construction due to a lightning strike. Each fire and other types of damages triggered by lightning are covered by the policy.

AIRPLANE DAMAGE: The loss or damage to property (by fire or otherwise) directly brought on by plane and other aerial contraptions and/ or articles dropped there from is covered. Despite the fact that, destruction or damage resulting from pressure waves as a result of by plane touring at supersonic speed is excluded from the scope of the policy.

RIOTS, STRIKES, MALICIOUS AND TERRORISM DAMAGES: The act of any person taking part along with others in any disturbance of public peace (other than war, invasion, mutiny, civil commotion etc.) is construed to be a Insurance policy, strike or a terrorist Recreation. Illegal action would not be covered under the policy.

Hurricane, CYCLONE, Hurricane, TEMPEST, Storm, Twister, FLOOD and INUNDATION: Typhoon, Cyclone, Hurricane, Tempest, Twister and Storm are all loads of types of violent herbal disturbances that are followed by thunder or strong winds or heavy rainfall. Flood or Inundation occurs when the water rises to an ordinary level. Flood or inundation should not only be understood in the typical sense of the terms, i.e., flood in river or lakes, but also accumulation of water due to choked drains would be deemed to be flood. 

AFFECT DAMAGE: Have an effect on by any Rail/ Road automobile or animal by direct contact with the insured property is covered. Despite the fact that, such motors or animals should not belong to or owned by the insured or any occupier of the premises or their employees while acting in the course of their employment.

SUBSIDENCE AND LANDSLIDE INCULUDING ROCKSIDE: Destruction or damage brought on by Subsidence of part of the site on which the property stands or Landslide/ Rockslide is covered. While Subsidence means sinking of land or development to a lower level, Landslide means sliding down of land always on a hill.

Besides the fact that children, normal cracking, payment or bedding down of new Battle through; contract or motion of made up Flooring; coastal or river erosion; defective design or workmanship or use of defective materials; and demolition, construction, structural adjustments or restoration of any property or ground-works or excavations, are not covered.

BURSTING AND/OR OVERFLOWING OF WATER TANKS, APPARATUS AND PIPES: Loss or damage to property by water or otherwise on account of bursting or accidental overflowing of water tanks, apparatus and pipes is covered.

MISSILE CHECKING OUT OPERATIONS: Destruction or damage, due to affect or otherwise from trajectory/ projectiles in connection with missile checking out operations by the Insured or anybody else, is covered.

LEAKAGE FROM AUTOMATIC SPRINKLER INSTALLATIONS: Damage, because of by water someway discharged or leaked out from automatic sprinkler installations in the insured's premises, is covered. Notwithstanding, such destruction or damage triggered by upkeep or changes to the homes or premises; maintenance removing or extension of the sprinkler Install; and defects in construction known to the insured, are not covered.

BUSH FIRE: This covers damage led to by burning, whether accidental or otherwise, of bush and jungles and the clearing of lands by fire, but excludes destruction or damage, triggered by Forest Fire.

DISADVANTAGES NOT COVERED BY FIRE INSURANCE POLICY

Claims not maintainable/ covered under this policy are as follows:

o Robbery during or after the incidence of any insured risks

o War or nuclear perils

o Electrical breakdowns

o Ordered burning by a public authority

o Subterranean fire

o Loss or damage to bullion, precious stones, curios (value more than Rs.10000), plans, drawings, money, securities, cheque books, pc files except if they are categorically included.

o Loss or damage to property moved to a alternative location (except equipment and equipment for cleaning, upkeep or protection for more than 60 days).

CHARACTERICTICS OF FIRE INSURANCE CONTRACT

A fire insurance contract has the following qualities namely:

(a) Fire insurance is a personal contract

A fire insurance contract does not make sure the protection of the insured property. Its purpose is to see that the insured does not suffer loss by reason of his interest in the insured property. As a result, if his connection with the insured property ceases by being transferred to one more person, the contract of insurance also comes to an end. It is not so related with the subject remember of the insurance as to pass mechanically to the new owner to whom the subject is transferred. The contract of fire insurance is thus a mere a personal contract between the insured and the insurer for the settlement of money. It can be validly assigned to one more only with the consent of the insurer.

(b) It is entire and indivisible contract.

Where the insurance is of a binding and its contents of inventory and Equipment, the contract is expressly agreed to be divisible. Thus , where the insured is in charge of breach of accountability toward the insurer in appreciate of one subject matters covered by the policy , the insurer can sidestep the contract as a whole and not only in appreciate of that particular subject mater , except the right is restrained by the terms of the policy.

(c) Cause of fire is immaterial

In insuring against fire, the insured wishes to protect him from any loss or detriment which he may suffer upon the prevalence of a fire, besides the fact that children it may be Led to. So long as the loss is due to fire within the which means of the policy, it is immaterial what the cause of fire is, Frequently. Thus , whether it was because the fire was lighted improperly or was lighted properly but negligently attended to thereafter or whether the fire was brought about on account of the negligence of the insured or his servants or strangers is immaterial and the insurer is liable to indemnify the insured. In the absence of fraud, the proximate cause of the loss only is to be looked to.

The cause of the fire despite the fact that turns into material to be investigated

(1). Where the fire is occasioned not by the negligence of, but by the willful

(2) Where the fire is due is to cause falling with the exception in the contract.

LIMITATION OF TIME

Indemnity insurance was an agreement by the insurer to confer on the insured a contractual right, which prima facie, came into lifestyles straight when the loss was suffered by the happening of an event insured against, to be put by the insurer into the same position in which the accused would have had the event not passed off but in no better position. There was a fundamental liability, i.e. to indemnify, and a secondary liability i.e. to put the insured in his pre-loss position, either by paying him a specifying amount or it might be in some other Method. But the fact that the insurer had an choice as to the way in which he would put the insured into pre-loss position did not mean that he was not liable to indemnify him in one way or One other, straight the loss Happened. The fundamental liability arises on the happening of the event insured against. So, the time ran from the date of the loss and not from the date on which the policy was averted and any suit filed after that time limit would be barred by limitation.[2]

WHO MAY INSURE AGAINST FIRE?

Only those who have insurable interest in a property can take fire insurance thereon. The following are among the class of persons who have been held to possess insurable interest in, property and can insure such property:

1. Householders of property, whether sole, or joint owner, or partner in the firm proudly owning the property. It is not necessary that they should ownership also. Thus a lesser and a lessee can each insure it at the same time or severely.

2. The vender and buyer have each rights to insure. The Proprietors interest continues till the conveyance is absolutely and even thereafter, if he has an unpaid Gives lien over it.

3. The mortgagor and mortgagee have each distinct pastimes in the mortgaged property and can insure, per Lord Esher M.R."The mortgagee does not claim his interest through the mortgagor , but by distinctive feature of the personal loan which has given him an interest distinct from that of the mortgagor"[3]

4. Trustees are legal homeowners and beneficiaries the helpful householders of trust property and each can insure it.

5. Bailees such as Companies, pawnbrokers or warehouse men are accountable for there protection of the property entrusted to them and so can insure it.

PERSON NOT ENTITLED TO INSURE

One who has no insurable interest in a property are not able to insure it. For example:

1. An unsecured creditor can't insure his Borrowers property, because his right is only against the debtor personally. He can, Notwithstanding, insure the Borrowers life.

2. A shareholder in a company are not able to insure the property of the company as he has no insurable interest in any asset of the company even if he is the sole shareholder. As was the case of Macaura v. Northen Warranty Co.[4] Macaura. Because neither as a simple creditor nor as a shareholder had he any insurable interest in it.

CONCEPT OF UTMOST FAITH

As all contracts of insurance are contracts of utmost good faith, the proposer for fire insurance is also under a positive accountability to make a full disclosure of all material records and not to make any misrepresentations or misdescreptions thereof during the negotiations for obtaining the policy. This responsibility of utmost good faith applies both to the insurer and the insured. There should be complete good faith on the part of the assured. This responsibility to study utmost good faith is ensured b requiring the proposer to declare that the statements in the inspiration form are true, that they shall be the foundation of the contract and that any incorrect or false statement therein shall keep away from the policy. The insurer can then rely on them to assess the risk and to fix authorized top rate and accept the risk or decline it.

The questions in the concept form for a fire policy are so framed as to get all information which is material to the insurer to know in order to assess the risk and fix the Fill up, that is, all material Data. Thus the proposer is required too give information relating to:

o The proposer's name and satisfactory and occupation

o The description of the subject remember to be insured enough for the purpose of determining it including,

o A description of the locality where it is situated

o How the property is being used, whether for any manufacturing purpose or damaging trade.etc

o Whether it has already been insured

o And also ant personal insurance background inclusive of the claims if any made buy the proposer, etc.

Apart from questions in the idea form, the proposer should disclose whether wondered or not-

1. Any information which would indicate the risk of fire to be above normal;

2. Any fact which would indicate that the insurer's liability may be more than normal can be expected such as lifestyles of beneficial manuscripts or Files, etc, and

3. Any information bearing upon the more; hazard involved.

The proposer is not obliged to disclose-

1. Information which the insurer may be presumed to know in the ordinary course of his business as an insurer;

2. Proof which tend to show that the risk is lesser than otherwise;

3. Records as to which information is waived by the insurer; and

4. Information which need not disclosed in view of a policy condition.

Thus, assured is under a solemn domicile to make full disclosure of material details which may be imperative for the insurer to take into account while deciding whether the concept should be usual or not. While making a disclosure of the valuable Records, the

DOCTRINE OF PROXIMATE CAUSE

Where more perils than one act concurrently or successively, it will be difficult to assess the relative effect of each peril or pick out one of these as the exact cause of the loss. In such Situations, the doctrine of proximate cause is helping to decide the genuine cause of the loss.
Proximate cause was described in Pawsey v. Scottish Union and National Ins. Co.,[5]as "the active, effective cause that units in motion a train of occasions which brings about a result without the intervention of any force begun and working actively from a new and unbiased source." It is dominant and effective cause even though it is not the nearest in time. It is thus necessary when a loss occurs to look at and ascertain what is the proximate cause of the loss in order to decide whether the insurer is liable for the loss.

PROXIMATE CAUSE OF DAMAGE

A fire policy covers dangers where damage is induced by way of fire. The fire may be brought about by lightening, by explosion or implosion. It may be result of Insurrection, strike or on account of any, malicious act. Notwithstanding these elements have the funds for in school lead to a fire and the fire have to be the proximate cause of damage. Hence, a loss precipitated by robbery of property by militants would not be covered by the fire policy. The view that the loss was covered under the malicious act clause and hence .the insurer was liable to meet the claim is untenable, because except and till fire is the proximate cause f damage, no claim under a fire policy would be maintainable.[6]

APPROACH FOR TAKING A FIRE INSURANCE POLICY

The steps involving for taking a fire insurance policy are pointed out below:

1. Selection of the Insurance Company:

There are many enterprises that be offering fire insurance against unexpected Occasions. The individual or the company need to take care in the selection of an insurance company. The judgment should rest on components like goodwill, and long term standing in the market. The insurance businesses can either be approached directly or through Sellers, some of them who are appointed by the company itself.

2. Submission of the Inspiration Form:

The individual or the business owner have the funds for submit a doggies prescribed idea form with the necessary info to the insurance company for proper consideration and subsequent approval. The information in the Notion Form should be given in good faith and need to be followed by paperwork that ascertain the exact worth of the property or goods that are to be insured. Most of the businesses have their own custom-made Concept Bureaucracy by which the exact information has to be provided.

3. Survey of the Property/ Consideration:

Once the duly filled Notion Form is submitted to the insurance company, it makes an "on the spot" survey of the property or the goods that are the subject counseled of the insurance. This is normally done by the investigators, or the surveyors, who are appointed by the company and they need to record back to them after a thorough research and survey. This is quintessential to assess the risk worried and calculate the rate of premium.

4. Famous of the Proposal:

Once the unique and comprehensive document is submitted to the insurance company by the surveyors and connected officers, the former makes a thorough perusal of the Suggestion Form and the Record. If the company is satisfied that their is no lacuna or foul play or fraud Concerned, it officially "accepts" the Thought Form and directs the insured to pay the first top rate to the company. It is to be spoke of that the insurance policy commences after the money and the popular of the top rate by the insured and the company, respectively. The Insurance Company concerns a Canopy Note after the reputation of the first premium.

PROCESS ON RECEIPT OF NOTICE OF LOSS

On receipt of the notice of loss, the insurer calls for the insured to supply facts pertaining to the loss in a claim from relating to the following information-

1. Condominium and cause of the fire;

2. Occupancy and situation of the premises in which the fire occurred;

3. Insured's interest in the insured property; that is capability in which the insured claims and whether any others are interested in the property;

4. Other insurances on the property;

5. Value of each item of the property at the time of loss together with proofs thereof , and value of the salvage ,if any; and

6. Amount claimed

Furnishing such information relating to the claim is also a condition precedent to the liability of the insurer. The above information will can help you the insurer to other than whether-

(1) The policy is in force;

(2) The peril causing the loss is an insured peril;

(3) The property damaged or lost is the insured property.

Bathroom for calculation of value of property

The value of the insured property is-

1) Its value at the time of loss, and

2) At the place of loss, and

3) Its real or intrinsic value without any regard for its sentimental vale. Loss of prospective profit or other consequential loss is not to be taken into account.

FILING OF CLAIMS

How a claim arises?

After a contract of fire insurance has come into Lifestyles, a claim may resolve by the operation of one or more insured perils on an unsecured property. There may in addition one or more uninsured perils also working at the same time or in succession of the property. In order that the claim should be legitimate the following stipulations afford be fulfilled:

1. The prevalence should take place due to the operation of an insured peril or where each insured and other perils operated , the dominant or efficient cause of the loss afford have been an insured peril;

2. The operation of the peril have the funds for not come within the scope of the policy exceptions;

3. The event afford have precipitated loss or damage of the insured property;

4. The incidence should be during the currency of the policy;

5. The insured should have fulfilled all the policy situations and should also comply with necessities to be fulfilled after the claim had arisen.

MATERIAL DATA IN FIRE INSURANCE: PREVIOUS CONVICTION OF THE ACCUSED

The crook record of an assured could have an effect on the moral hazard, which insurers had to assess, and the non-disclosure of a serious felony offence like theft by the plaintiff would a material non-disclosure.

INSURED'S RESPONSIBILITY ON OUTBREAK OF FIRE, IMPLIED DUTY

On the outbreak of a fire the insured is under an implied accountability to take a look at good faith toward the insurers and the in pursuance of it the insured afford do his premier to avoid or decrease the loss. For this purpose he have the funds for (1) take all low-cost measures to put out the fire or prevent its spread, and (2) assist the fire brigade and others in their tries to do so at any rate not come in their way.
With this object the insured property may be removed to a place of Protection. Any loss or damage the insured property may sustain in the course of tries to field of regard the fire or during its removing to a place of protection etc., will be deemed to be loss proximately triggered by the fire.

If the insured fails in his responsibility willfully and thereby will increase the burden of the insurer, the insured will be disadvantaged of his right to revive any indemnity under the policy.[7]

INSURER'S RIGHTS ON THE OUTBREAK OF FIRE

(A) Implied Rights

Corresponding to the insured's obligations the insurers have rights by the law, in view of the liability they have undertaken to indemnify the insured. Thus the insurers have a right to-

o Take comparatively cheap measures to extinguish the fire and to cut the loss to property, and

o For that purpose, to enter upon and take ownership of the property.

The insurers will be liable to make good all the damage the property may sustain during the steps taken to put out the fire and as long as it in their Ownership, because all that is considered the herbal and direct consequence of the fire; it has hence been held in the case of Ahmedbhoy Habibhoy v. Bombay Fire Marine Ins. Co [8] that the extent of the damage flowing from the insured peril have enough money be assessed when the insurer supplies back and not as at the time when the peril ceased.

(B) Loss led to by steps taken to ward off the risk

Damage sustained due to action taken to stay away from an insured risk was not a consequence of that risk and was not recoverable until the insured risk had begun to operate. In the case of Liverpool and London and Globe Insurance Co. Ltd v. Canadian General Electric Co. Ltd., [9] the Canadian Splendid Court held that "the loss was brought about by the fire Opponents unsuitable belief that their action was necessary to prevent an explosion , and the loss was not recoverable under the insurance policy, which covered only damage induced by fire explosion., and the loss was not recoverable under the insurance policy, which covered only damage led to by fire or explosion."

(C) Exhibit rights

Condition 5- in order to protect their rights well insurers have prescribed for better rights expressly in this condition according to which on the happening of any destruction or damage the insurer and every person suitable by the insurer may enter, take or keep ownership of the construction or premises where the damage has came about or require it to be delivered to them and deal with it for all inexpensive functions like Inspecting, arranging, doing away with or sell or dispose off the same for the account of whom it may concern.

When and how a claim is made?

In the event of a fire loss covered under the fire insurance policy, the Insured shall instantly give notice thereof to the insurance company. Within 15 days of the prevalence of such loss, the Insured should submit a claim in writing, giving the particulars of damages and their estimated values. Information of other insurances on the same property should also be declared.

The Insured should procure and produce, at his own Cost, any document like plans, account books, research reports etc. on call for by the insurance company.

HOW INSURANCE MAY CEASE?

Insurance under a fire policy may cease in any of the following Cases, namely:

(1) Insurer heading off the policy by reason of the insured making misrepresentation, misdescription or non-disclosure of any material particular;

(2) If there is a fall or displacement of any insured development range or constitution or part thereof , then on the expiry of seven days wherefrom, except where the fall or displacement was due to the action of any insured peril; though this, the insurance may be revived on revised terms if categorical notice is given to the company as soon as the prevalence takes place;

(3) The insurance may be terminated at any tie at the request of the insured and at the alternative of the company on 15 days notice to the insured

CONCLUSION

Tangible property is exposed to a lot disadvantages like fire, floods, explosions, earthquake, insurance plans and war, etc. and insurance policy cover can be had against most of these hazards severally or in Combo. The form in which the canopy is expressed is a number of and Dissimilar. Fire insurance in its strict sense is concerned with giving insurance policy against fire and fire only. So while granting a fire insurance policy all the standards need be fulfilled. The insured are under a moral and legal domicile to be at utmost good faith and should be telling true information and not just false grounds only with the greed to get well money. Further all insurance guidelines assist in the construction of a Arising nation. Therefore insurance enterprises have a burden to assist the insured when the insured are in trouble.

REFERENCE:

1. (1983) VR 698 Very best( Court of Vienna)

2. Callaghan v. Dominion Insurance Co. Ltd. (1997) 2 Lloyd's Rep. 541 (QBD)

3. Small v. United kingdom. Marine Insurance Organization (1897) 2 QB 311
4. (1925) AC 619

5. (1907) Case.

6. National Insurance Company v. Ashok Kumar Barariio

7. Devlin v. Queen Insurance Co, (1882) 46 UCR 611.

8. (1912) 40 IA 10 PC

9. (1981) 123 DLR (3d) 513 Ideal( Court of Canada)

Books Referred:

1. The Economics of Fire Insurance plan by Ganapathy Ramachandran

2. Contemporary Insurance Law, by John Birds

3. The Instruction manual of Insurance Regulatory and Growth Authority Act and Policies with Allied Regulations ,by Nagar.