Fire Insurance

Question 1

Fire Insurance

Answer 1

(Sec. 169)

a CONTRACT OF INDEMNITY by which the insurer for a consideration agrees to indemnify the insured against loss of, or damage to property by (FLW-TEO) FIRE, LIGHTNING, WINDSTORM, TORNADO or EARTHQUAKE and OTHER ALLIED RISKS, when such risks are covered by (a.) EXTENSION TO FIRE INSURANCE POLICIES or (b.) UNDER SEPARATE POLICIES

Question 2

NATURE of Fire Insurance

Answer 2

It is essentially a CONTRACT OF INDEMNITY Liability of insurer is to pay for DIRECT LOSS only; may be liable to pay for CONSEQUENTIAL LOSSES if covered by by

(a. ) EXTENSION TO FIRE INSURANCE POLICIES or
(b. ) UNDER SEPARATE POLICIES

Question 3

Fire

Answer 3

the oxidation which is so rapid as to produce either a flame or glow. It is always caused by COMBUSTION, but does not always cause fire

Question 4

“Spontaneous”

Answer 4

refers to the ORIGIN of combustion. The internal development without the action of an external agent.

Question 5

Hostile Fire vs Friendly fire

Answer 5

(a.) Definition

• HF:* one that ESCAPES from the place where it is intended to burn and ought to be. A fire that started as Friendly but escapes or becomes too strong as it becomes out of control.
• FF*: Burns in a place where it was intended to burn or ought to be

(b.) Liability of INSURER

• HF:* Liable
• FF:* NOT liable

( c.) Example

• HF:* Fire from a gas stove escaping
• FF:* Fire burning in the fireplace

Question 6

Measure of Indemnity

Answer 6

OPEN POLICY:

only the expenses NECESSARY to REPLACE the thing lost or injured in the CONDITION it was AT THE TIME OF THE INJURY

VALUED POLICY:

parties are BOUND by the valuation, in the ABSENCE of FRAUD or MISTAKE (and when the insured has INSURABLE INTEREST therein)

Question 7

INSURER’S LIABILITY in Valued Policy

Answer 7

(Section 174)

1. TOTAL loss

WHOLE amount so insured

2. PARTIAL loss

FULL AMOUNT of partial loss

Question 8

CO-INSURANCE CLAUSE

Answer 8

A clause requiring the insured to MAINTAIN INURANCE to an amount EQUAL TO THE VALUE or SPECIFIED PERCENTAGE of the value of the insured property UNDER PENALTY OF BECOMING CO-INSURER to the extent of such deficiency, the DIFFERENCE between the value or percentage insured and the am_ount of the insurance_

Question 9

PURPOSE of Co-Insurance Clause

Answer 9

To PREVENT the property owners from TAKING OUT such small amount of insurance, and thereby REDUCING THE PREMIUM PAYMENT, and thereby INCREASING the RATES OF PREMIUM FOR ALL

Question 10

RULE ON ALTERATION

Answer 10

GR:

NOT ALL alterations rescind the policy

XP:

1. alteration INCREASES the risk (Sec. 171)
2. when there is VIOLATION of the provisions of the policy (Sec. 172)

Question 11

Alteration as a special ground for rescission by Insurer: REQUISITES

Answer 11

(CALVIM)

1. alteration made WITHOUT THE CONSENT of the INSURER (Sec. 170)
2. Such USE or CONDITION as limited by the policy is ALTERED (Sec. 170)
3. use or condition is specifically LIMITED or STIPULATED in the policy (Sec. 171)
4. VIOALTION of a provision of the policy (Sec. 172)
5. alteration INCREASES the risk (Sec. 170)
6. alteration is made by MEANS WITHIN THE CONTROL of the Insured (Sec. 170)

Question 12

Alterations AVOIDING Policy

Answer 12

1. When risk of loss INCREASED

the policy is avoided by ANY ALTERATION in the USE OR CONDITION of the property insured increasing the risk

eg. firecrackers placed in the building insured

2. Where the increase in the risk of loss is NO LONGER EXISTING at the time of the loss

INSURER would still be LIABLE if the increase in hazard was no longer existing at the time of the loss

eg. firecrackers in the insured building had already been removed and in no way contributed to the loss UNLESS there is a BREACH OF WARRANTY that no hazardous goods should be stored or kept in the property insured

Question 13

Alterations NOT AVOIDING the Policy

Answer 13

1. Where risk of loss NOT INCREASED

there is NOT an INCREASE OF RISK and the policy is NOT AVOIDED where a DIFFERENT USE is made of the insured premises, which use is NOT of a DANGEROUS CHARACTER and DOES NOT DIFFER MATERIALLY from the use specified in the policy, even though additional or increased premium may be asked

2. Where questioned articles REQUIRED by INSURED’S BUSINESS

the policy will NOT be AVOIDED

3. Where Insured property WOULD BE USELESS if questioned acts were prohibited

the policy WILL NOT be AVOIDED. However, MAKING OF REPAIRS, PAINTING, or DOING OTHER ACTS of similar character on the thing insured are NOT to be regarded as increasing the risk since the property would be useless to the insured if such acts were prohibited

Question 14

RULE where INCREASE OF RISK is caused by an ACCIDENT

Answer 14

Insurer is NOT RELIEVED FROM LIABILITY if the acts or circumstances by which the risk is increased are occassioned by

(a. )ACCIDENT, or
(b. ) a cause over which the INSURED HAS NO CONTROL.

Question 15

RULE where INCREASE OF RISK is caused by the INSURED’S TENANT

Answer 15

Every act of the insured’s tenant SUBSTANTIALLY and PERMANENTLY affecting the condition of the property so as to constitute an increase in risk, would be PRESUMPTIVELY KNOWN to the insured

Question 16

FALL-OUT-OF BUILDING CLAUSE

Answer 16

clause in a fire insurance policy that if the building or any part thereof falls, except as a result of fire, the policy shall immediately cease

Question 17

OPTION TO REBUILD CLAUSE

Answer 17

clause giving the INSURER the OPTION to REINSTATE or REPLACE the property damaged or destroyed or any part thereof, INSTEAD OF PAYING the amount of the loss or the damage.

The insurer, after electing to REBUILD, cannot be compelled to perform this undertaking by specific performance because this is an OBLIGATION TO DO, NOT TO GIVE

REMEDY:

if a person obliged to do something fails to do it, the same shall be executed at his cost (Civil Code, Art. 1167)