Fire and Lightning Insurance Policy
Fire, out of the few, is attributed to be the one and the very significant element of human life. No doubt it is highly invaluable. Inspite of its invaluability, it on the other hand, has a devastating effect. Quite innumerable damages are globally caused proportionately. Let alone the globe, its obliteration here in Ethiopia is in an ascending rate.
The following will exemplify this:
According to the Addis Ababa Fire Brigade, 357 fire perils resulting in the death of 7 people, 32 heavy & light injuries and a material loss worthing Birr 32,842,489 were registered in the past nine months starting from July 2007 up to March 2008. In the same year 219 houses burnt, 22 cars flamed and four factories were partially and totally destroyed.
Had all these been forecasted before, it would have been possible to kneel down the loss. The problem is, however, it is accidental. It is such a type that whoever can never avoid.
What is possible is only to compensate, replace (not life), install … what is lost. How? this is only or mainly by owning the Ethiopian Insurance Corporation’s Fire & Lightning Policy.
What is Fire?
Fire is a chemical reaction and it is a combination of three things. The three things which should be combined to create fire are fuel, heat and oxygen. These three things are known as the fire triangle. Since a triangle is no more a triangle if one side of it is missed, there is no fire if one of the combinations needed to create fire doesn’t exist.
Therefore, putting fire out means depriving one of its vital components or separating two of them.
THE DEFINITION OF THE POLICY AND ITS SCOPE OF COVER
The basic fire and lightning policy seeks to indemnify the insured for a direct loss of or damage to property as a result of fire or lightning. Moreover damage caused by explosion of boiler or gas used for domestic purpose is also covered under the policy.
In order to constitute fire within the meaning of fire and lightning insurance policy, the following three important conditions must be fulfilled:-
a) there must be actual ignition;
b) there must be something on fire which ought not to be on fire and;
c) the fire must be accidental or fortuitous, in its origin as far as the insured is concerned. It must not be willful or intentional on the part of the insured.
Other types of loss/damage as listed below are also covered though not directly caused by fire or lightning.
- Smoke damage caused by fire with the context it has in the policy.
- Property damaged by water or other extinguishing agent used for the extinguishment of the fire.
- Property blown up to prevent fire from spreading;
- Losses incurred by the insured in attempting to check the progress of a fire or to save property. This could be in the form of damage to property removed from a burning building caused by rain or damage during removal.
However, the insured must take reasonable steps as soon as possible to protect the removed property. The reason why such losses are covered is that they have been caused by the insured during his duty in trying to minimize the loss.
Even though fire is the proximate cause, if the insurer can bring up evidences which show or prove that:-
a) the fire was caused by an excepted peril;
b) there was insured’s consent or willfullness as to the cause of the fire;
the insured cannot claim indemnity under the fire and lightning policy.
In relation to Fire & Lightning Insurance Policy the question of liability is inevitable. Because there are causes where liability is denied when excepted perils play a part as proximate cause of fire. for example, fire caused by its own fermentation or heating is not covered. The following example makes clear the case at hand.
e.g. Hay stack causes spontaneous ignition. The fire damage to the stack is not covered. But fire damage to other stocks is covered.
Subject matter burned, but the fire is as brought about by and as natural consequence of an excepted peril. The excepted peril is the proximate cause and the insured cannot recover under the policy.
SUBJECT MATTER INSURED
The property insured under a fire policy comprises the following:-
- Building (such as offices, hospitals, warehouses, factories etc.)
- Contents therein and thereon (other than stock), the property of the insured or held by him in trust for which he is responsible.
- stock, either manufacture’s or retailer’s
Anyone or all of the following special perils can be included to the fire and lightning cover at an additional premium.
a) Perils of chemical type:-
Explosion, spontaneous fermentation or heating:-
The explosion of steam pressure vessels (boiler) is not covered because it is more properly treated under engineering policy. Explosion caused by domestic utilities is also not covered. However concussion damage by explosion of dust like vegetable oil mills, boot and shoe factories, silos etc. and explosion of inflammable vapors in paint factories is covered.
b) Social Perils:- Riot, strike and civil commotion (RSCC) damage effected by labour disturbances or by malicious persons is covered with additional premium. Damages undertaken with intent are regarded as malicious damage.
i) damage arising out of confiscation, requisition or destruction by government order;
ii) damage arising out of cessation of work;
iii) damage by theft ;
iv) damage to un-occupied buildings.
c) Perils of nature:-Storm, flood, earthquake land slide etc. Flood is often caused proximately or remotely by storm. For this reason flood cover is usually one written as an extension of storm cover. The policies also have an excess applied to ensure that small items of general maintenance do not become the subject of claims.
d) Miscellaneous Perils:- Escape of water, impact damage & aircraft damages.
Damage caused by water:- From any tank apparatus or pipe or with regard to trading purpose for cooling, or washing is covered. However, damage to any building which is empty or not in use is not covered.
Impact: walls, gates and fences damaged when a company’s vehicle is entering or leaving the premise is covered. However, the insurance company does not intend to make good for damages caused by poor driving. Own impact cover is also available but subject to excess for each and every loss.
Aircraft: This extension intends to indemnify insured against materials loss caused by the crashing of an aircraft or part of an aircraft on the property insured. There is a right of recovery against the aircraft operators. However, damage from pressure wave or sonic bangs caused by aircrafts is not covered.
The standard fire & lightning policy does not cover the following
- Damage caused by
a) riot or civil commotion, unless these perils are specified in the schedule of the policy and
b) war, invasion, act of foreign enemy, hostilities, civil war, rebellion, revolution, insurrection or military or usurped power.
2. Any loss or expense resulting from or in consequence of
a) ionizing radiations, contamination by radio active, nuclear fuel or nuclear waste etc.
b) radio active toxic explosive or other hazardous properties
3. Loss or destruction or damage caused by pollution or contamination but this shall not exclude destruction of or damage to the property insured, not otherwise excluded, caused by:-
a) Pollution or contamination which itself results from a peril insured against,
b) Any peril hereby insured against which itself results from pollution or contamination.
4. Any property more specifically insured by or on behalf of the insured.
5. Consequential loss or damage of any kind or description except loss of rent if such loss is included in the cover under the policy.
SOINTS TO BE CONSIDERED
The following should be taken into account both by the insurer and the insured. The insurer and the insured shall be abide by the following:-
- If a sum insured at the commencement of any DAMAGE (loss, destruction or damage) is less than the value of the property covered and a sum insured is declared to be subject to average, the amount payable by the insurer in respect of such damage shall be proportionately reduced.2. The policy will be void at the option of the insurer in the event of misrepresentation, misdescription or non-disclosure in any particular material fact.
- Every warranty to which the policy or any item is made subject will be attached and apply right from the time of agreement.
- The insured is expected to take all reasonable precautions to preview damage.
- If a claim is fraudulent or if any fraudulent means are used by the insured or any one acting on his behalf to obtain benefit under this policy or if willful act has caused damage, all benefit under this policy will be forfeited.
- The insurer may at its option reinstate or replace the property damage or destroyed instead of paying the amount of the loss or damage. The insurer shall not be bound to reinstate exactly but only as circumstances permit and in a reasonably sufficient manner. But in no case shall the insurer be bound to expend more than the sum insured.
- On the happening of damage in respect of which a claim is made, the insurer has the right to:-
- enter or keep possession of the building or premises where such damage has occurred;
- take possession of and deal with the goods or property in any reasonable manner.
But any action taken is not to be construed as an admission of liability.
- If at the time of any damage there is any other insurance effected by or on behalf of the insured covering any of the property lost, destroyed or damaged, the liability of the insurer will be limited to its rateable proportion of such damage.
- Any claimant under the policy shall at the request and expense of the insurer take all necessary steps for enforcing rights against any other party in the name of the insurer before or after any payment is made by the insurer.
- If any difference arises in connection with this policy, such difference shall be referred to an arbitrator.
Any insured is expected to go through the following on requesting for claims:
a) must notify the damage to the insurer immediately;
b) should notify the damage to the police as quickly as possible;
c) should carry and also permit any action to be taken which would limit the fire from causing further damage and;
d) at his own expense must
– give full information in writing on the property damaged by fire and also the amount of damage;
– reveal details of any other insurance company if the property is insured and
– hand in all such proofs and information useful for the claim handling.
Once the insurer is informed of the loss event: –
- i) Checks on the cover of the risk;
ii) Inspects the damage and discusses with the insured. He appoints loss adjuster if there is need for specialist fire surveyor. The loss adjuster inspects the loss, talks to insured, policemen, fire brigades, witnesses and incorporates his findings in his report. By so doing, he clarifies the circumstance of the loss and also investigates the cause of the loss.
iii) Summarizes actual repair cost.
iv) Collects salvage value if to be retained for the insured.
This brochure is prepared to elaborate about “Fire And Lightning Insurance Policy” Provided by the Corporation. Therefore, legally it shall not come to force.