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Flashcards in Fire Insurance Deck (17)
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1

Fire Insurance

(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

2

NATURE of Fire Insurance

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

3

Fire

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

4

"Spontaneous"

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

5

Hostile Fire vs Friendly fire

(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

6

Measure of Indemnity

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)

7

INSURER'S LIABILITY in Valued Policy

(Section 174)

 

1. TOTAL loss

WHOLE amount so insured

 

2. PARTIAL loss

FULL AMOUNT of partial loss

8

CO-INSURANCE CLAUSE

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 amount of the insurance

9

PURPOSE of Co-Insurance Clause

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

10

RULE ON ALTERATION

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)

11

Alteration as a special ground for rescission by Insurer: REQUISITES

(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)

12

Alterations AVOIDING Policy

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

13

Alterations NOT AVOIDING the Policy

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

14

RULE where INCREASE OF RISK is caused by an ACCIDENT

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.

15

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

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

16

FALL-OUT-OF BUILDING CLAUSE

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

17

OPTION TO REBUILD CLAUSE

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)