INSURER'S RIGHTS OF FIRE INSURANCE

INSURER'S RIGHTS OF FIRE INSURANCE

In strict sense, a fire insurance contract is one whose principle object is insured against loss or damage occasioned by fire. The extent of insurer's liability being limited by the sum assured and not necessarily by the extent of loss or damage sustained by the insured. The insurer having no interest in the safety or destruction of the insured property apart from the liability undertaken under the contract.

INSURER’S RIGHTS

1. Right to avoid the policy.

Utmost good faith is an implied condition in an insurance contract and places upon the insured a duty to deal honestly with the insurer when a claim arises. Fraud will avoid the policy, so also will full fire caused by the insured or with his connivance.

2. Right of entry and control over the property.

On the happening of any loss or damage to any of the property insured, the insurance company may enter and take and keep possession of the building or premises where the loss or damage has happened. These rights are necessary for the insurer to ascertain the cause and extent of loss or damage, to minimize the damage and to protect the salvage.

3. Right of reinstatement.

The insurance company may at its option reinstate or replace the property damaged or destroyed instead of paying the amount of the loss or damage in money. The insured has no tight to claim reinstatement. The main object of this right is to have some protection against unreasonable or exaggerated claims.

4.Right to salvage.

After a fire has occurred, it is the duty of the assured to hand over the salvage to the insurer. The insurers are entitled to the salvage for whatever it is worth. Where the insurer pays for a loss in full, he is entitled by way of salvage to all that remains of the thing insured. The insurer becomes owner of the salvage as from the date of the fire.

5. Right to subrogation.

After the payment of the policy money, the insurer is entitled to all the rights and remedies which may be possessed by the insured in respect of the subject-matter of insurance. This right of the insurer whereby he steps into the shoes of the assured is called the right of subrogation. The insurer must first pay under the policy of insurance before he can claim the right of subrogation. But the insurers are usually enabled to exercise the right of subrogation even before the payment, by an appropriate policy condition.

6.Right of contribution.

Where a person has taken out more than one policy, against the same risk with several insurers, the payment of the full amount of the insured’s loss by one or more of the insurers will discharge the other insurers from their liability. The insurers who have paid are entitled to call upon the others to contribute proportionately towards the loss. This is called the right of contribution amongst the co-insurers.

SCOPE OF FIRE INSURANCE

FIRE INSURANCE BUSINESS:

Loss Due To Fire, Lightening, Explosion, Implosion,, Riots & Strikes, Impact By Rail, Aircraft Damage, Earth Quake, Flood, Storm, Tempest, Tornado, Typhoon, Cyclones & Land Slide.

Insurable object in Fire Insurance

•      Building

•      Electrical installation in buildings

•      Machinery, Plant and equipment

•      Goods ( raw materials, stocks in process, semi finished, finished etc ) in factories

•      Goods in open

•      Contents in dwellings

•      Shops, Hotels  etc.

•      Furniture, fixture and fittings, pipelines located inside or outside the compound etc.

Types of Fire Insurance Policy

1. Valued  Policy

It is usually taken where it is not easy to ascertain the value of the property. In this policy the indemnity is a fixed amount agreed upon at the time of signing the contract. The insured is benefited when the market value  of the  property declines , but suffer  loss when the market value appreciates. The valued insurance policy is usually offered for such items like jewellery, furs, or paintings, which value is difficult to estimate once they are damaged or destroyed by fire.

 2. Floating Policy

It is taken to cover loss on goods, which are lying in different places and the stock of which is almost continuously fluctuating. It is taken out for those goods which are frequently changing in a warehouse. Floating policies are suitable to those traders or products whose raw-materials or merchandise are lying at different localities or go downs. For example:-Some of the goods of other trader are kept in one go down, and few kept in another go down, some kept  in the railway go down  or some at the sea port open.

3. Declaration Policy

This policy is taken in respect of stock of inventory of the policyholder. Since the level of stock which are subject to frequent fluctuations in value the businessman takes a policy for a maximum amount considered to be at risk and the premium is paid accordingly.On a fixed date of every month the policyholder declares the amount of stock covered under the policy to the insurance company.

4. Adjustable Policy

It is issued for existing stock. In this policy, premium rate shall be adjusted according to increase or decrease in the value of stock, this change will be notified to the insurer by the insured. In case of loss by fire, the amount notified by the insured at the maturity  of the policy is taken as final and indemnified up to that limit. It is a contract limited to merchandise or stock in trade other than farming stock.

5. Specific Policy

A specific policy is a type of policy in which the property is insured for a specific sum irrespective of its value. If there is loss, the stated amount will have to be paid to the policyholder. The actual value of the subject matter is not considered in this respect. For example: If a property is insured for Rs. 10000 though its actual value is Rs. 20000. In the event of  loss to property, not more than Rs. 10000 can be recovered.

6. Average Policy

Where a property is insured for a sum which is less than its value, the policy contain a clause that the insurer shall not be liable to pay the full loss but only that proportion of the loss which the amount insured for, bears to the full value of the property. For example: A value of the property is Rs.1,00,000. It is insured for Rs.60,000 (60% of the total value). The amount of loss is Rs 60,000.The insurance  company will not pay Rs.60,000 to the policyholder but will pay Rs.36,000 (60% of Rs.60,000).