FIRE INSURANCE

By: SUNIT MATHUR

RO-1, NEW DELHI
 OVERVIEW
• No. of Sections : 8
• No. of Perils ( In built ) : 12
• No. of Exclusions : 13
• No. of General Conditions: 15
• No. of Add On Covers : 15+6
• No. of Clauses : 11 ( A to K )
 SECTIONS
SECTION I : GENERAL RULES & REGULATION.
SECTION II : POLICY WORDING
SECTION III : DWELLINGS, OFFICES ETC.
SECTION IV : INDUSTRIAL & MANU. RISKS
SECTION V: UTILITIES OUSIDE MANU. RISK
SECTION VI: STORAGE OUTSIDE MANU. RISK
SECTION VII: TANKS FARMS / GAS HOLDERS
OUTSIDE MANU. RISK
SECTION VIII: ADD ON COVERS
 COVERAGES
1. FIRE
2. LIGHTENING
3. EXPLOSION/ IMPLOSION
4. AIRCRAFT DAMAGE
5. RIOT, STRIKE & MALICIOUS DAMAGE.
6. STORM, CYCLONE, TYPHOON, TEMPEST, HURRICANE, TOR
NADO, FLOOD & INUNDATION,
7. IMPACT DAMAGE
8. SUBSIDENCE & LANDSLIDE INCLUDING ROCK SLIDE
9. BURSTING & /OR OVERFLOWING OF WATER
TANKS, APPARATUS & PIPES
10. MISSILE TESTING OPERATIONS
11. LEAKAGE FROM AUTOMATIC SPRINKLER INSTALLATIONS
12. BUSH FIRE
1. FIRE :
Excluding (i) own fermentation, natural heating or
spontaneous combustion
(ii) Its undergoing heating & drying process
(iii) Burning by order of Govt.
FIRE IN INSURANCE :
• Actual ignition under accidental circumstances
for insured – Ignition means burning – presence
of flames, thus loss by smoke, heating, charring
without burning is not considered “fire”
• The property should not be on fire
• FIRE IN INSURACE POLICY :
• Fire lighted for definite purpose is not
considered Fire for Insurance unless broken its
limits – like sugar processing
• No difference if fire comes to property or
property comes to the fire – like unlighted
grate
( both the above cases fire breaks its limits &
causes ignition or property breaks its proper
limits & comes into contact with fire, there is
an accidental loss by fire )
• FIRE IN INSURACE POLICY :
• Once there is a fire within the meaning of the
policy – other losses becomes payable like:
• Smoke & heat
• Scorching
• Falling Walls
• Damage of Fire brigade water, chemical etc.
• Damage to property removed from burning
caused by weather provided removal made for
LCM.
LIGHTNING ( AOG )
• An electricity for clouds – Loss with or without
actual ignition covered
3. EXPLOSION / IMPLOSION
• Only domestic boilers are covered for
explosion / implosion ( for other perils the
commercial boilers can be covered )
4.AIRCRAFT DAMAGE
• Damage by Aircraft or other aerial or space
devices and articles dropping therefrom
except damage caused by pressure waves
. RIOT, STRIKE & MALICIOUS DAMAGE
• Only visible physical damage by
external, violent means – Except
(i) Permanent or temporary dispossession by
the order of Govt.
(ii) Permanent or temporary dispossession
resulting from the unlawful occupation by any
person
(iii) Burglary, housebreaking, theft ( whether
or not committed in course of disturbance of
public peace)
6. STROM, CYCLONE, FLOOD….ETC. (AOG)
( Excluding resulting from Earthquake or other
convulsions of nature – If Earthquake if covered
through add on than this exclusion is not
applicable)
• Storm: violent disturbance of atmosphere with
thunder or strong wind or heavy rainfall
• Tempest : A violent Storm
• Cyclone & Hurricane : Storm of greater intensity
• Flood : Escape of water from its normal confines (
except water from tanks or apparatus or pipe)
 - Overflowing of lakes, rivers, canals, sea by
high tides etc.
- Bursting of street water mains, overflowing
of sewage pipes
• Inundation : Synonymous of Flood
7. IMPACT DAMAGE – Direct physical visible loss
by impact of rail / road vehicle or animal not
belonging to :
- Insured or occupier of the premises
- The employees of the insured
8. SUBSIDENCE & LANDSLIDE INCLUDING
ROCKSLIDE - EXCEPT
- Normal cracking, bedding down of new bldg.
- Settlement or movement of made up ground
- Coastal or river erosion
- Defective design or workmanship or use of
defective material
-
Demolition, construction, alteration, repair, ex
cavation of the property
9. BURSTING & / OR OVERFLOWING OF WATER
TANKS, APPARATUS & PIPES
- Largely applicable to cold regions where
bursting of pipes takes place
10. MISSILE TESTING OPERATIONS:
- Carried out by Defence Deptt., Govt. of India
11. LEAKAGE FROM AUTOMATIC SPRINKLER
INSTALLATIONS – EXCEPT
- Repair or alternation of the bldg.
- Repair, removal or extension of sprinkler
- Defects in construction known to insured
12. BUSH FIRE :
Excluding loss of damage by Forest Fire
GENERAL EXCLUSIONS
1. EXCESS ( NOT FOR DWELLINGS ) W.E.F. POLICIES
ON OR AFTER 01.04.2010: - PER EVENT PER
INSURED
• Policies having SI of Rs.10 Crores Per location
(i) For AOG perils : 5% of claim amount subject
to Minimum of Rs.10,000/-. Each & every loss
(ii) For other perils : Rs.10,000 each & every loss
• Policies having SI above Rs.10 Crores Per location
(i) For AOG perils : 5% of claim amount subject to
Minimum of Rs.25,000/-. Each & every loss
(ii) For other perils : 5% of claim amount subject
to Minimum of Rs.10,000/-. Each & every loss
2. War and kindred Perils
3. Radioactive Contamination
4. Pollution or Contamination Except :
(i) Pollution or contamination caused by the
insured peril or,
(ii) The insured peril which did the loss is caused by
the pollution or contamination
5. Loss to any bullion, curios, work of art, antique
exceeding Rs.10,000/-, stamps, coins, cash etc.
Unless expressly stated in the policy
6. Stocks of cold storage due to temperature change
7. Loss to any electrical machine, apparatus, fitting
by over-running, short circuiting, self heating,
electricity leakage from whatever cause –
exclusion applicable for particular machine
8. (a ) Architects, Engineer’s fee in excess of 3% of
claim amount
(b) Debris Removal expenses in excess of 1% of
claim amount
9. Any Consequential loss – like profit, market etc.
10. Loss of spoilage due to retardation or
interruption of any process caused by insured
perils
11. Loss by theft during or after occurrence except
as provided in RSMD ( burglary or theft due to
riots, strikes are covered under Fire Policy)
12. Earthquake Damage
13. Loss to any property in the place other than
which stated in the policy except machinery or
equipment temporarily removed for
repairs, renovation etc. for not more than 60
days.
 GENERAL CONDITIONS
1. Misrepresentation, non-disclosure etc.
2. Bldg. Fall and displacement : ( part or whole)
(i) All Insurance under this policy cease on
expiry of 7 days from the date of such fall if
occurred other than insured peril.
( ii ) If Fall by insured perils the Co. should be
notified within 7 days for continuance of
insurance on revised rates, terms &
conditions
3. Alternation :
Policy becomes void unless notify to the Company
(i) If the Trade, Manu. Or occupation changes
(ii) If bldg. is unoccupied for more than 30 days
(iii) If interest passes from the insured except
automatically by will or law ( in case of death of
insured)
4. Marine Clause : If the same property is covered
under the Marine Policy the loss will not
payable in Fire Policy except any excess amount
over the marine policy
5. CANCELLATION : By either Party – giving 15 days
notice and refund of premium
6.DUTIES OF THE INSURED :
(i) For any claim give notice in writing and a claim
statement item wise within 15 days of loss at his
own expense without any profit
(ii) Details of all other insurances, if any
(iii) Co. not liable for loss after expiry of 12
months from the date of loss unless claim is
subject to pending action or arbitration .
(iv ) If claim is repudiated by the Co., & the
insured has not filed a suit within 12 months of
date of repudiation, it is not recoverable
thereafter
7. RIGHTS OF INSURER :
After a loss the Co. without admitting liability can:
(i) Enter, take possession, examine, sorting and can
do salvaging operations
(ii) If the insured do not co-operate or hinders the
benefits of the Policy forfeits
(iii) The insured cannot abandon the property after
loss whether possessed by the Co. or not
8. FRAUD : If any fraudulent means used for
claiming, the benefits of policy forfeits.
9. OPTION OF THE INSURER:
(i) If Co. feels the claim amount is exaggerated
then has option of reinstate or replace the
damaged property subject to S.I.
(ii) If due to municipal regulations Co. cannot
reinstate then Co. will pay such amount
requisite to reinstate to its former condition.
10. CONDITION OF AVERAGE (
UNDERINSURANCE)
11. CONTRIBUTION
12. SUBROGATION : Company take rights &
remedies even before payment of claim
13. ARBITRATION ( only in case of quantum of
claim, loss otherwise admitted under the Policy)
14. ALL NOTICE / CORRESPONDENCE MUST BE IN
WRITING
15. REINSTATEMENT OF SUM INSURED AFTER A
LOSS :
(i) By deducting pro-rata premium from the net claim
amount
(ii) If insured notify the Co. immediately after the loss for
not reinstating the SI, then the SI will be reduced by the
amount of claim paid
S.NO. ADD ON COVER RATE APPLICABLE VALUE TO BE
INSURED
1. Architects, consulting Engineers fees Policy Rate Specified SI not
in excess of 3% of claim amount exceeding 7.5% of
claim amount
2. Removal of Debris ( in excess of 1% Policy Rate Specified SI upto
of Claim Amount) maximum 10% of S.I.

3. (a) Deterioration of Stock in Cold Policy Rate Sum Insured of the

Storage by to change of Stocks
temperature due to power failure at
Power Station by insured perils
(a) Deterioration of Stock in Cold Policy Rate Sum Insured of the
Storage by to change of Stocks
temperature due to loss to
machinery at premises by insured
perils
4. Forest Fire Minimum 3.75%o Specified SI
5. Impact Damage due to Insured’s 5% of Policy Rate Policy Sum Insured
own Rail/road vehicle, lifts,
cranes
6. Spontaneous Combustion Category I : 0.20%0 SI of relative
Category I Category I : 0.45%0 commodity
Category II
7. Omission to Insure additions, Policy Rate 5% of SI of BMA
alterations or extensions

8. Earthquake ( Fire & Shock ) Zone I : 0.75%o Policy S .I. ( Dwellings,

Zone I Zone II : 0.40%o offices ratable under
Zone II Zone III : 0.15%o Section III will be
Zone III Zone IV: 0.075%o charged as Zone IV
Zone IV rate regardless the
Zone
9. Spoilage Damage Material Cover (i) 5 times of policy rate (i) Value of stocks in
(i) Stocks in specified blocks (ii) 2.5 times of policy rate specified blocks
(ii) Machinery in specified blocks (ii) Value of M/A in
specified blocks
10. Leakage & Contamination Only Leakage & Specified Sum
a. Where tanks located in insured’s leakage Contamination Insured
premises a. 3.75%o a.7.5%o
b. Where tanks are located b. 4.5%o b. 9.00%o
elsewhere
11. Temporary removal of Stocks 10% of Policy Rate Policy S.I.

12. Loss of Rent Clause ( For Owner of Policy Rate Specified SI

Bldg.)

13. Addl. Expenses of rent for an Policy rate Specified SI

alternative accommodation ( For
Tenant )
14. Start up expenses Policy rate Specified SI

15. Terrorism ( Only with RSMD ) Rates as per the Terrorism Policy Sum
Pool Insured
 CLAUSES
A. AGREED BANK CLAUSE : To protect the interest
of a banker or financer whose interest is in the
insured property
B. CONTRACT PRICE INSURANCE CLAUSE
For imported goods only where the prices are
fixed as per contract – little deviation of
indemnity
C. DESIGNATION OF PROPERTY CLAUSE
Co. accept the designation under which the
property entered in the insured’s book
D. REINSTATEMENT VALUE POLICIES
• Only for Bldg., P & M, FFF & not to stocks
• Reinstatement must commence and complete
within 12 months of date of loss
• Underinsurance will also apply
• If need extension of time notify the Company
• If insured fail to intimate the intention of
reinstatement within 6 months than the this
clause will not apply
• If insured unwilling to replace the property than
on market value basis
• Reinstatement can carry out at another site also
E. LOCAL AUTHORITY CLAUSE
• Reinstatement Value policies can be extended
for this clause
• Some extra expenses can be allowed to
comply the local by laws but subject to S.I.
F. ESCALATION CLAUSE
• Maximum 10% if allowed ( IGT )
• 50% of full rate on selected percentage
• Only for Bldg., P & M & not for stocks & FFF
G. ARCHITECTS FEE ( upto 3% of claim amount)
H. REMOVAL OF DEBRIS ( upto 1% of claim amt.)
I. FLOATER CLAUSE
• One, more or all locations as specified
• Should have good internal audit & account
• Change of location must be intimated
J. DECLARATION CLAUSE
• Basis of declaration (i) Average of value on each day of
the month or (ii) Highest Value during the month
• Declaration must be latest by the last day of next
month
J. DECLARATION CLAUSE
• On expiry subject to adjustment by taking
average of 12 declarations – Maximum refund
35% only
• Basis of valuation – Market Value basis
• If stock is covered by any other insurance than
this policy will be used only for the excess
amount, if any
K. VOLUNTARY DEDUCTIBLE CLAUSE
 GENERAL RULES AND REGULATIONS
• All India Fire Tariff effective from 31.03.2001
• Detariff from 01.01.2007 ( IGT from 01.01.2008 )
• Only SFSP with permitted add on covers is allowed
• Only land based properties are allowed
• Policy covering Bldg. & Contents shall show all block-
wise separate amount on (i) Bldg. (ii) Machinery &
Accessories (iii) Stock & Stock in Process & (iv)
Furniture & other contents
• Deletion of STFI & RSMD is allowed
• Rates shown are minimum rates & higher rates can be
charged
• Valued Policies : For property whose market
value cannot be ascertained like works of
art, obsolete machinery etc. subject to
valuation certificate
• Long Term Policies : No policy exceeding 12
months can be issued except “Dwellings”
• Mid Term Cover: Generally not permissible to
grant STFI & RSMD perils mid term. If allowed
with certain conditions :
(i) Must receive specific advice from insured
with payment in Cash or draft. No adjustment
from existing CD or Bank Guarantee
(ii) Should be for entire property covering
entire interest
 • Cover shall commence after 15 days of receipt
of premium
• Premium rates as under shall be on Short
Period Scale

Mid-term SECTION SECTION VI SECTION

Inclusion III IV, V &
Material in Material in VII
of
Godown Open
STFI 0.20%o 0.35%o 2.00%o 0.35%o
RSMD 0.15%o 0.15%o 0.15%o 0.15%o
• Payment of Premium : Shall be paid in full &
no installment is allowed – not permissible to
split SI of same property in various policies to
take advantage of deferred payments.
However various policies of stock can be
issued where necessitate.

• Minimum Premium : Minimum Premium shall

be Rs.200. ( IGT )
• Partial Insurance
a. Not to issue certain part of Bldg. However
Plinth & Foundation or only foundation can be
excluded
b. Not to issue covering specified machinery (
except boilers ) or part of the machinery
c. Where portions of a bldg. or machinery is
under different ownership, in such cases it is
permissible for each owner to insure his own
portion but full extent of his interest.
• SHORT PERIOD RATES
Not Exceeding 15 days 10% of Annual Rates
Not Exceeding 1 Month 15% of Annual Rates
Not Exceeding 2 Months 30% of Annual Rates
Not Exceeding 3 Months 40% of Annual Rates
Not Exceeding 4 Months 50% of Annual Rates
Not Exceeding 5 Months 60% of Annual Rates
Not Exceeding 6 Months 70% of Annual Rates
Not Exceeding 7 Months 75% of Annual Rates
Not Exceeding 8 Months 80% of Annual Rates
Not Exceeding 9 Months 85% of Annual Rates
Exceeding 9 Months The Full Annual Rates
Extension of Short Period Policy shall not be permitted
• Rules for Cancellation
At the Option of Insured : (i) Retention of SP Rates
(ii) During Currency if the policy replaced by same
Co. by new annual policy for same property then
Pro-rata refund is allowed
(iii) For the SI not replaced refund after retaining
premium on SP Rates for such S.I.
(iv) In Case of S.P. policies premium retained as per
S.P. Rates
(v) In case Policy cancelled by Govt. Orders or on
completion of a Bldg. in course of construction or
where bldg. is demolished, pro-rata refund be
allowed
At the Option of Insurer : Pro-rata refund is allowed
• Mid Term Revision in S.I.
Increase in S.I. : On Pro-rata Basis
Decrease in S.I.: On Short Period Scale
• Escalation Clause
a. Only upto 10% of the S.I.
b. 50% of Full Rate to be charged on selected
%age
c. Only for Bldg., Machinery & Accessories & not for
stocks
d. Average condition will also apply
• Floater Policy : Can be issued for stocks at
various locations under one Sum Insured (
unspecified locations are not allowed )
- Rate Shall be highest rate applicable at any
location with 10% loading
- In case stock in process block is covered
under Floater Policy & the rate of process
block is higher than the storage rate, the
process block rate plus 10% loading shall apply
- If stock situated within godown / process
block in the same compound are covered
under floater policy, no floater extra is
chargeable
• Declaration Policies : For frequent fluctuations in
Stock / Stock Values
- Minimum SI shall be Rs. 1 Crore in one or more
locations & the SI shall not be less than 25 lacs in
atleast one of these locations. Declared value
should approximate to this figure at sometime
during the policy year
- Monthly declaration based on (a) average of the
values at risk on each day of month or (b) highest
value at risk during the month. If declaration not
received within specified time the full SI shall be
deemed to have been declared
- Reduction of SI is not allowed
- Refund of premium on adjustment shall not
exceed 35% of the total premium
- Basis of Valuation will be Market Value

- Not Permissible for (a) on Short Period Basis

(b) Stocks undergoing process © Stocks at
Railway sidings

- If at the time of loss it is found that the last

decl. previous to the loss is less than the amt.
ought to have been declared, the claim amt.
shall be reduced in such proportion as the
amt. of said last decl. bears to the amt. that
ought to have been declared.
• Floater Declaration Policies :
- Minimum S.I should be 2 Crores
- Both Floater & Declaration policy rules will
apply
- Minimum retention of premium shall be 80%

• Rating of Multiple Occupancy Industrial Estate

- Shall be rated ‘per se’
- If the Entire Bldg. of Industrial Estate is
insured under one S.I. a rate of 1.80%o be
charged
- The Contents will be rated ‘per se’
• Silent Risk : Under Section IV & V Only

- Factories where no manufacturing & Storage

work is carried out for continuously 30 or
more days

- Retention of premium shall be based on

appropriate storage rate or silent risk rate of
Rs. 1.00%o whichever is higher

- The Silent risk rates are not applicable if risk is

silent due to a claim / loss.
VOLUNTARY DEDUCTIBLES – both SFSP plus add ons
Deductible Amount (Rs. In Lacs) Discount
AOG Perils Other Perils (%)
5% of claim amt. subject to
minimum to Rs.
10 Lakhs 5 Lakhs 4
20 Lakhs 10 Lakhs 8
30 Lakhs 15 Lakhs 10
60 Lakhs 30 Lakhs 12
100 Lakhs 40 Lakhs 14
>100 Lakhs >50 Lakhs Refer to
HO
 SECTION III
• Dwellings, Officers, Hotels, Shops Etc. Located outside the
compound of a Factory
• Long Terms Policy for ‘Dwellings’ only
- Minimum for 3 yrs.
- Refund : Subject of Circular dt.03.03.2009 i.e.
- (i) If cancelled within 3 years – retain premium with normal
rates with no discount
- (ii) If cancelled after 3 years – rework premium as per
discounted slabs – For fraction of year, rounded of to next
higher year – Subject to retention of minimum premium
- No inclusion of perils mid-term
- Method : A
- Method : B ( Discount upto 50 % for 10 yrs. & above)
 SECTION IV
• INDUSTRIAL / MANUFACTURING RISK
- One rate for entire property in one compound i.e.
process area, storage, office, utilities etc.
- If more than one product is manufactured in the
same block the highest rate will be applicable
- If 2 or more factories are there or independent
products are manufactured in the same
compound the manu. Block shall be rated ‘per
se’ if located detached. Misc. Blocks / utilities /
godowns / tank farms etc. in such cases shall
carry lowest rate of all such manu. Blocks.
- Dwelling located inside the factory may be rated
‘per se’
 SECTION V
• Utilities outside the Manufacturing Risks
- Rates given for various utilities
 SECTION VI
• Storage outside Indl./ Manu. Risk
- Two Rates – Within Godown & Open
- 4 Categories – NH, I, II, & III
- Rates will apply for bldg./ storage area and stocks
- Operation like packing/selecting/mending /stitching
etc. are covered if do not materially alter nature of risk
- Presence of hazardous goods of higher category not
exceeding 5% to total S.I. are also covered
- Utilities / Misc. Blocks shall be rated Re. 1.00%o
- Open Storage of 2% of S.I. is allowed when the risk is
rated within godown
 SECTION VII
• Tanks Farms / Gas Holders outside the Factory
• All tanks in same area shall carry highest rate
- Tanks of hazardous chemicals / liquid are covered

- Utilities & Misc. Blocks shall be rated at

Re.1.00%o

- Associated properties like pumping

station, compressor house, blower house etc. will
rated at par with Gas holder
 CLAIMS
• While Deputing Surveyor the nature of subject
matter involved should be kept in mind and
appropriate Surveyor should be appointed
• A Company official should visit to site as early as
possible
• If there is a doubt in admissibility of claim – an
investigator should also be appointed
• For disposal of salvage the general guidelines laid
down should be followed – but salvage disposal
be undertaken on priority basis because the
salvage due to Fire deteriorate faster.
• Processing of Claims – documents required
A. Common
1. Claim Intimation
2. Policy
3. Claim Form
4. Survey Report
B. Specific
In case of Fire & Explosion : (i) FIR & Fire Brigade
Report
In case of AOG:(i) Meteorological Report or in
absence (a) Local Bodies certificate or (b)
cutting of newspaper
In case of RSMD & Impact damage : Police
Report
DOS due to Power Failure :
(i) Log Book Maintained by the insured for
maintaining temperature
(ii) Certificate from Electricity Deptt.

In Addition to the above the U/W may insist any

other document / evidence to establish loss
 NON-STANDARD / COMPROMISE

• When breach is not material or of tech. nature

or beyond the control or knowledge of insured
:
(i) Policy is rectified after collecting addl.
Premium if due
(ii) A deduction is made from assessed amt.
equivalent to 3 years premium – which would
have come had correct information available
• If breach is material to loss or insured or his
agent contributed to loss and has not
consciously committed the breach :
- Payment can be considered on merits of each
case upto a maximum of 75% of the Assessed
Loss
STEPS INVOLVED IN LOSS ASSESSMENT

1. Gross Loss Assessed

Less : Depreciation = A
2. Less : Salvage = B
3. Less : Under Insurance = C
4. Less : Excess = D
5. Net Claim Payable = A-B-C-D
THANK YOU