Answer:

Fire insurance is a contract of indemnity whereby the insurer undertakes to compensate the insured for the loss or damage caused to the property by fire during a specified period in consideration of premium paid.

Essential Elements:

• Subject Matter: Tangible property that can be damaged by fire
• Insurable Interest: Must exist at inception and at time of loss
• Premium: Consideration paid by insured
• Period: Specified duration (usually one year)
• Sum Insured: Maximum liability of insurer
• Indemnity: Compensation for actual loss only
• Utmost Good Faith: Full disclosure of material facts

Answer:

Case Law: Stanley v. Western Insurance Co. - Held that mere heating without actual ignition is not fire.

Answer:

The doctrine of proximate cause (Causa Proxima) states that the immediate and effective cause of loss must be considered, not the remote cause.

Principle: "Causa proxima non remota spectatur" - The proximate, not the remote cause is to be regarded.

Application in Fire Insurance:

• Direct loss by fire is always covered
• Indirect loss covered if fire is proximate cause
• Chain of causation must be unbroken

Important Case Laws:

• Pawsey v. Scottish Union (1908): Damage by demolition to prevent fire spread was covered as fire was proximate cause
• Marsden v. City and County Assurance (1865): Water damage while extinguishing fire was covered
• Everett v. London Assurance (1865): Theft during fire covered if fire created the opportunity

Answer:

Standard exclusions in fire insurance policy include:

• War Perils: War, invasion, civil war, rebellion, revolution
• Nuclear Perils: Nuclear reaction, radiation, radioactive contamination
• Willful Acts: Loss caused willfully by insured or with connivance
• Normal Wear and Tear: Gradual deterioration
• Consequential Losses: Loss of profit, rent (unless specifically covered)
• Spontaneous Combustion: Unless covered by endorsement
• Earthquake: Unless specifically added
• Fermentation: Heating due to fermentation process

Excluded Items:

• Cash, securities, bonds, stamps
• Bullion, precious stones (except stock-in-trade)
• Motor vehicles
• Livestock, standing crops

Answer:

Insurable interest means the legal or equitable interest in the property such that the insured will benefit from its preservation and suffer loss from its destruction.

When Required:

• At the time of taking policy (inception)
• At the time of loss (when fire occurs)

Who Has Insurable Interest:

• Owner of property
• Mortgagee/Pledgee
• Trustee
• Bailee
• Agent holding goods
• Tenant (for improvements)

Important Case Law:

Macaura v. Northern Assurance Co. (1925):

• Facts: Shareholder insured company's timber in his own name
• Held: Shareholder has no insurable interest in company's property. Company and shareholder are separate legal entities
• Principle: No insurable interest = No valid insurance

Answer:

The Average Clause (Condition of Average) penalizes underinsurance. If property is insured for less than its actual value, the insured becomes a co-insurer for the difference and bears proportionate loss.

Formula:

Numerical Example:

Answer:

Step-by-Step Procedure:

1. Immediate Action: Take steps to extinguish fire and minimize damage
2. Fire Brigade: Call fire brigade immediately
3. Notify Insurer: Inform insurance company within 24-48 hours
4. Police FIR: File if arson/theft suspected
5. Preserve Evidence: Protect property from further damage
6. Submit Claim: File claim form with required documents
7. Survey: Cooperate with insurance surveyor
8. Assessment: Surveyor assesses damage and submits report
9. Settlement: Insurer evaluates and makes offer
10. Payment: Final settlement within 90 days

Required Documents:

• Claim form (duly filled)
• Original policy document
• Fire brigade report
• Police FIR and report
• List of damaged items with values
• Photographs of damage
• Purchase bills/invoices
• Survey report

Answer:

1. Valued Policy:

• Value agreed at inception
• Agreed value paid in case of total loss
• Used for antiques, artwork

2. Specific Policy:

• Most common type
• Covers specific sum
• Actual value determined at time of loss

3. Floating Policy:

• Covers property at multiple locations
• Or property moving between locations
• Single sum insured for all locations

4. Comprehensive Policy:

• Covers fire plus additional perils
• Earthquake, flood, RSMD, terrorism, etc.
• Higher premium but wider coverage

5. Consequential Loss Policy:

• Covers loss of profit
• Standing charges during business interruption
• Additional to standard fire policy

6. Replacement/Reinstatement Policy:

• Pays replacement cost without depreciation
• Or rebuilds/repairs property

Answer:

Case: Joel v. Law Union and Crown Insurance Co. (1908)

Facts:

• Joel took a fire insurance policy for his property
• He did not disclose his previous conviction for arson
• Later, fire occurred and he filed claim
• Insurance company discovered the non-disclosure

Issue:

Whether non-disclosure of previous criminal conviction for arson is material enough to void the policy?

Court's Decision:

• The court held that the policy was void
• Previous conviction for arson is highly material fact
• It directly affects the risk assessment
• Insurer would not have issued policy or would have charged higher premium

Legal Principle:

• Fire insurance is contract of utmost good faith (uberrima fides)
• All material facts must be disclosed
• Material fact is one that would influence prudent insurer's decision
• Non-disclosure of material fact makes policy voidable

Significance:

This case emphasizes the importance of full disclosure in insurance contracts and defines what constitutes a material fact in fire insurance.

Answer:

Standard Coverage (Included in Basic Premium):

• Fire: Loss or damage by hostile fire (actual ignition)
• Lightning: Damage by lightning, even without subsequent fire
• Explosion/Implosion: Of domestic boilers, gas cylinders

Consequential Damages Covered:

• Water damage from firefighting
• Damage by chemicals used in firefighting
• Damage by demolition to prevent fire spread
• Theft during/immediately after fire

Additional Perils (On Payment of Extra Premium):

Note: Premium increases based on number and type of additional perils covered.