DEFINITION

There is said to be a fire within the meaning of fire insurance when:

  • There is actual ignition.

  • The fire is purely accidental or fortuitous in origin so far as the insured is concerned.

  • The fire has burnt / damaged the property of the insured.

STANDARD FIRE & SPECIAL PERILS POLICY COVERS

This policy is taken to insure a specified risk which could be any or all of the following building, furniture & fittings, stocks, plant and machinery and any other other specified fixed assets.

PERILS COVERED

The major perils covered in a fire policy can be grouped as:-

Fire Perils

  • Fire.

  • Explosion / implosion.

  • Aircraft damage.

  • AOG perils.

  • Lightning. Storm, cyclone, tempest, hurricane, tornado & flood.

  • Subsidence & landslide including rock slide.

Social Perils

  • Riot, strike, malicious damage.

  • Terrorism (the optional cover).

Other perils

  • Impact damage.

  • Bursting or overflowing of water tanks & pipes.

  • Bush fire.

Fire Perils

Fire - actual ignition by accident means, and does not include the following:

  • Property undergoing drying / heating process.

  • Burning by order of public authority.

  • Spontaneous combustion.

EXPLOSION / IMPLOSION

Explosion due to domestic boilers is covered, but explosion due to industrial boilers are covered under “Boiler Pressure plant Machinery”. Explosion by centrifugal forces are not covered.

AIRCRAFT DAMAGE

Aerial devices, space craft causing direct physical impact damage are covered. Damage by falling objects are also covered. Shattering of wall due to sonic boom is not covered.

AOG PERILS

LIGHTINING

Lightning means visual discharge of atmospheric electricity. Only direct effects are covered and indirect effects like voltage surge are not covered.

SCTTTHF

Storm, cyclone, tempest, typhoon, tornado, hurricane, flood and inundation.

Wind as per Beaufort Index of wind velocity and location. Based on the wind speed and velocity it is classified and is called differently in different places.

Flood

  • Water coming out of its natural confines ex:
    Drainage overflows, water tank overflows is also considered as flooding.

  • Inundation entry of floodwater into the property.

  • Landslide / Subsidence Gradual sinking or settling in of soft sub soil.

SOCIAL PERILS

RSMD

  • Riot - unlawful assembly of 4 or more persons.

  • Strike - revolt against established authority.

Malicious Damage

  • Damage caused due to personal grouse or ill will.
    All acts of commission are covered and Acts of omission are not covered.
    Eg: During strike employees may cause physical damage. This is an act of commission. This is covered.

  • Failure to switch off fan and consequential damage caused due to this is not covered. This Is an act of omission and is not covered.

  • Prevention of access is not covered. Burglary and theft during RSMD is covered.

OTHER PERILS

  • Impact damage - damage due to collision with third party. Impact damage from insured’s own vehicle or vehicle of his employees is not covered.

  • Missile testing - exposure to this risk is mainly present along the Indian East coast near Gopalpura region. Any damage due to wrong firing of missiles is covered.

  • Inadvertent leakage from sprinklers other than defects and repairs are covered.

  • Bush Fire - fire from foliage other than forest fire is covered.

EXCLUSIONS

  • War and war group of perils.

  • Nuclear group of perils.

  • Earthquake / volcanic eruption.

  • Theft / burglary except during strike.

  • Electrical fire due to short circuit, arcing, excess of voltage.

Excluded Property

  • Bullion, curios, plans and drawings beyond Rs 10,000.00.

  • Loss or damage to machinery when removed to another place for repair for a period beyond 60 days.

Excluded Losses

  • Consequential losses.

  • Damage by spoilage due to interruption of any process.

  • Damage to stocks in cold storage premises.

RULES AND REGULATIONS UNDER TARIFF

One Industry One Rate

As per the new guidelines, the principle of One Industry One Rate should be
followed. It is important to classify the industry as per the correct risk code.

No selection of Property

All property has to be covered and selection of property is not allowed in Fire Insurance.

BLOCKWISE SUM INSURED

  • Building.

  • Plant and machinery.

  • Stock.

  • Stock in process.

  • Furniture.

  • Fittings.

RISKS ARE COVERED IN TWO MAJOR HEAD

Non Industrial Risks

Includes dwellings, shops, hotels, schools, colleges, clubs, office premises etc.

Industrial Risks

Eg: Chemical, textile, rubber, cement, sugar etc.

PERILS PARTICULAR TO PARTICULAR INDUSTRY

There are certain perils which are not common across the board, but are
specific to certain industries only like:-

  • Spontaneous Combustion - coal.

  • Material Spoilage - breweries.

These can be added on as optional to the standard policy.

SPECIAL STOCK INSURANCE POLICY

FLOATING POLICIES

Floating policies are policies which are taken to insure the risk at a number of locations under one policy. Floating policies can be issued in respect of immovable property. It is permissible to issue a policy covering stock in one account in more than one specified building or in open within the limit of one city / town / village.

DECLARATION POLICIES

Declaration policies are policies which are issued in case there is a fluctuating stock balance throughout the year. These policies are issued for the highest sum insured throughout the year & the unused balance is refunded against declarations.

BASIS OF VALUATION POLICY

Reinstatement value policies are taken for covering a risk for the value of it’s reconstruction / replacement / reinstatement in case of a loss. This basis of valuation is followed while taking up the insurance policy to ensure that the insured is adequately covered in case of a loss. Reinstatement value insurance may be granted on buildings, machinery, furniture, fixture & fittings only.

SPECIAL / RATED RISKS

Certain industries can be given special confessional rate which has to be granted by the Tariff Advisory Committee only.

SPECIAL CLAUSE

Escalation Clause

An increase in the sum insured throughout the period of the policy can be opted by the insured in return for an additional premium to be paid in advance.

INSURANCE OF ADDITIONAL EXPENSES OF RENT FOR AN ALTERNATIVE ACCOMMODATION

Additional expense of rent for an alternative accommodation in respect of non - manufacturing risks may be covered under Fire Material Damage policy only on the following basis:

  • The cover may be granted for non - manufacturing premises only.

  • The rate should be same as applicable to the existing premises under occupation.

  • The additional expense recoverable under the policy may be additional rent actually paid i.e., the difference between the new and the original rent only.

  • Insurance should be granted against RSMTD and earthquake & other extraneous perils.

  • The cover may be limited to building f superior and class I construction.

LOSS OF RENT CLAUSE

Where loss of rent caused by insured perils is covered, the rate chargeable for the above cover is the rate applicable to the particular building or premises concerned.

OMISSION TO INSURE ADDITIONS, ALTERATION OR EXTENSIONS CLAUSE

The insurance by this policy extends to cover buildings and / or machinery, plant and other contents as defined in columns….. here of which the insured may erect or acquire or for which they may become responsible:

  • At the within described premises.

  • For use as factories.

RATING CALCULATION OF PREMIUM

The tariff Advisory Committee vide its circular dated 04.12.06 has withdraw the rates applicable under the fire Tariff w.e.f.01.01.07.

Now company would have to file fresh rates with the TAC under the new file and use guidelines.

AVERAGE

By applying the Principle of average, the adequacy of Sum insured is
checked. Under insurance is penalized. Claims are settled on the
following basis:

Claim Amount = Loss x Sum insured
value

CONTRIBUTION

In case of multiple insurers then the loss will be borne by them as per
their ratios and proportions.

SUBROGATION

Any claim is to be settled by the person who perpetuated the loss. After indemnifying the insured, the insurer steps into the shoes of the insured. Subrogation is the transfer of rights and remedies of the insured against the Third party to the insurer.

RE-INSTATEMENT OF SUM INSURED

Sum insured is per policy limit. Any claim settled will reduce the Sum insured by the claim amount. Sum insured will be re - instated by payment of additional premium for the un-expired period from date of loss.