INSURANCE LAW

UNIT-7 FIRE INSURANCE

SYNOPSIS
 Introduction
 Meaning of fire insurance
 Meaning of fire in fire insurance
 Main elements of Fire insurance contract
 The types of losses covered by fire insurance
 The types of losses not covered by a fire insurance
 A claim for loss by fire must satisfy
 Features of fire insurance

INTRODUCTION
Fire insurance is a legal contract between an insurance company and the
policyholder which guarantees that any loss or damages caused to the property
in a fire will be paid by the insurance company.
Fires and other related perils, i.e. events which cause a financial loss, have
become acommon cause of losses in recent times.
These perils cause unspeakable loss to property aswell as goods. That is why
having a fire insurance policy becomes important.

MEANING OF FIRE INSURANCE

Fire insurance is a form of property insurance that covers damage and losses
caused by fire.
Fire insurance is a form of property insurance that offers extra compensation for
loss or damage to a building that has been damaged or destroyed by a fire.
Fire insurance policies typically contain general exclusions such as war, nuclear
risks, and similar perils. Damage caused by a fire set deliberately is also
typically not covered.

MEANING OF ‘FIRE’ IN FIRE INSURANCE CONTRACT

In the fire insurance policy, 'Fire' means the production of light and heat by
combustion or burning. Thus, fire, must result from actual ignition and the
resulting loss must be proximately caused by such ignition. The phrase 'loss or
damage by fire' also includes the loss or damage caused by efforts to extinguish
fire.
The term ‘fire’ must satisfy two conditions:
(a) There must be actual fire or ignition;
(b) The fire should be accidental.
The property must be damaged or burnt by fire. If the property is damaged by
heat or smoke without ignition it will not be covered under the word ‘fire’.

MAIN ELEMENTS OF FIRE INSURANCE CONTRACT

Fire insurance is contract where the insurer undertakes to pay the insured in
case of damage caused by fire. To claim fire insurance two conditions need to
be met. There must be actual loss due to fire and the fire must must be
accidental.
The main elements of a fire insurance contract are:
(i) In fire insurance, the insured must have insurable interest in the subject
matter of the insurance. Without insurable interest the contract of insurance is
void. In case of fire insurance, unlike life insurance insurable interest must be
present both at the time of insurance and at the time of loss.
(ii) Similar to the life insurance contract, the contract of fire insurance is a
contract of utmost good faith i.e., uberrimae fidei.
(iii) The contract of fire insurance is a contract of strict indemnity. The insured
can, in the event of loss, recover the actual amount of loss from the insurer. This
is subject to the maximum amount for which the subject matter is insured.
(iv) The insurer is liable to compensate only when fire is the proximate cause of
damage or loss.

THE TYPES OF LOSSES COVERED BY FIRE INSURANCE ARE:-

 Goods spoiled or property damaged by water used to extinguish the fire.
 Pulling down of adjacent premises by the fire brigade in order to prevent
the progress of flame.
 Breakage of goods in the process of their removal from the building
where fire is raging e.g. damage caused by throwing furniture out of
window.
 Wages paid to persons employed for extinguishing fire.
THE TYPES OF LOSSES NOT COVERED BY A FIRE INSURANCE
POLICY ARE:-
 loss due to fire caused by earthquake, invasion, act of foreign enemy,
hostilities or war, civil strife, riots, mutiny, martial law, military rising or
rebellion or insurrection.
 loss caused by subterranean (underground) fire.
 loss caused by burning of property by order of any public authority.
 loss by theft during or after the occurrence of fire.
 loss or damage to property caused by its own fermentation or
spontaneous combustion e.g. exploding of a bomb due to an inherent
defect in it.
 loss or damage by lightening or explosion is not covered unless these
cause actual ignition which spread into fire.

A CLAIM FOR LOSS BY FIRE MUST SATISFY THE FOLLOWING

CONDITIONS:-
 The loss must be caused by actual fire or ignition and not just by high
temperature.
 The proximate cause of loss should be fire.
 The loss or damage must relate to subject matter of policy.
 The ignition must be either of the goods or of the premises where goods
are kept.
 The fire must be accidental, not intentional. If the fire is caused through a
malicious or deliberate act of the insured or his agents, the insurer will
not be liable for the loss.

FEATURES OF A FIRE INSURANCE CONTRACT

1. A fire insurance contract is a contract of indemnity. It means the insured can
only recover the amount of loss subject to a maximum of the sum assured.
2. The insured person should have insurable interest in the subject-matter of the
‘contract, both at the time of the contract and at the time of loss.
3. A contract of fire insurance covers the risk of loss resulting from fire or any
cause which is a proximate cause of such loss.
4. A fire insurance contract is an yearly contract.„It automatically lapses after
the expiry of the year, unless it is renewed.