losses have to be settled within the framework of the insurance contact, taking into account its terms an conditions, its limitations and restrictions, insurers observe good faith and ensure that restrictions , insurers observe good faith and ensure that as far as possible losses are settled according to the spirit of the insurance contract rather than its letter. prompt and fair settlement of losses requires not only knowledge of insurance law practice but also personal qualities of patience, tact, diplomacy an courtesy on the part of claims officials and staff.
DUTIES OF THE INSURED
it is the duty of the insured to observe good faith not only at the pre-insurance stage but also during the currency of the policy and specially after occurrence of a loss the insured has to act as if uninsured. apart from notifying the fire brigade the insured must take immediate steps to extinguish the fire to prevent it form spreading and wherever practicable to remove the property insured to a place of safety. the other important duties of the insured are to a) give notice of loss to insurers and b) submit proofs and particulars of loss. this I provided for in policy condition 6 of the fire policy. finally it is provided that no claim under the policy is payable unless the terms of this condition have been complied with. this, of course applies to the particular claim and the policy as such otherwise remains valid.
ONUS OF PROOF
onus of proof refers to the task or duty imposed on someone to prove that what he has stated or affirmed is true. under a fire policy the onus of proving that the loss was the direct result of fire is one the insured . it is sufficient if he produces evidence that the property is actually damaged or destroyed by fire. where a breach of condition of the policy is alleged the onus of proving it is on the insurers.
THE DOCTRINE OF PROXIMATE CAUSE
the essence of the insurance contract is provision of indemnity for financial loss suffered by the insured as a result of the happening of an vent insured against under the policy. when the loss arises the insured has to prove that the loss he has suffered is the loss provided for in the policy. the fire policy provides for payment of direct loss suffered by the insured from the damage or destruction by fire or other insured peril of certain specified property. it is not the intention of the fire policy to cover such losses. to make the position abundantly clear the fire policy specifically excludes loss of earnings loss by delay loss of market or other consequential or indirect loss or damage of any kind or description whatsoever.
EXCEPTED PERILS
the doctrine of proximate cause applies equally to exceptions. if the loss is proximately caused by an excepted peril, there is no liability under the policy. thus where a bomb dropped by an enemy aircraft sets fire to a warehouse the loss though caused by fire is proximately caused by enemy action.
RIGHT OF INSURES
under common law insurers have certain powers and rights which correspond to the duties imposed on the insured to take all reasonable step to extinguish the fire to diminish their loss and to save as mush as possible of the property insured. it is equally important not only to the insurers themselves but also to the body of the insuring public that insurers should make a complete investigation both into the details of the claim and into the circumstances of the fire and this requires taking over and keeping possession of the salvage as also premises until investigation is complete. finally the condition provides that the insured has no right to abandon the property to the insurers whether taken possession of by the insurers or not. if some property is saved from loss salvage the value of such salvage is deducted from the amount of the claim even if the salvage has no value and a total loss settlement is made the insured cannot abandon the salvage.
WARRANTIES
A warranty is an undertaking by the insured. in non insurance commercial law a warranty has a different meaning it is only a stipulation, breath of which does not go to the root of the contract. warranties have to be distinguished from representations. the latter are statements are orally or in writing before or at the time of concluding the contract. although insurers are entitled to avoid a claim if there is breach of warranty a strict enforcement of the legal position may cause hardship to the insured. warranty forms attached to the policy incorporate a condition to the effect that all warranties apply during the entire currency of the policy.
WITHOUT PREJUDICE
claims correspondence with the insured relating to a claim is marked without prejudice. the words have the effect of leaving the question of ultimate liability under the policy open. for eg, the folloing action taken by the insurance is without prejudice to their right to deny liability if they are legally entiled to do so.
1) issuance of a claim form
2) receipt of documents relative to cause of loss or amount of loss
3) conduct of survey and investigation to demine the cause of loss or amount of loss etc.
RULES OF INTERPRETATION OF POLICIES
when there any disputes as to the meaning of words used in a policy , the courts are guided by the following rules which are known in legal language as rules of construction
the other are if clauses and endorsements are reached to the policy they will override the printed matter in the body of the policy typewritten matter will override printed matter and hand written will override all other matter. whenever there is any ambiguity in the policy or any doubt as to the meaning and effect of the words used the courts give the benefit of doubt to the insured. this is the legal rule its rationale is the party who has drafted the insurance contact insurer must suffer if there I doubt or ambiguity in the policy.
THE AMOUNT OF CLAIM PAYABLE
the amount of claim payable under the fire policy is governed by the legal principle of indemnity and is also subject to the terms and conditions of the insurance contract. a contract of fire insurance is a contract of indemnity. the insurers undertake by the payment of a sum of money. the intention is as far as if practicable the insured should neither be better nor worse off as a result of the operation of an insured peril.
MEANING OF VALUE
it Is essential to have a clear conception of the expression value from an insurance point of view. the word is not defined in the policy but insurance practice over the years has given the word meaning which is acceptable to all concerned. there are two kinds of value a)value in use and b) value in exchange . value in use depends upon the various benefits the owner derives from the property by way of income comfort pleasure etc. insurance is concerned with the actual real or intrinsic value of the property. the term market value in insurance practice has different meaning in different meaning in different to the principle of indemnity in a practical manager. therefore in practice the basis adopted is that which is best calculated in the particular case to carry out the intention of the parties . the basis adopted must enable the insured.
BUILDINGS
in the case of total destruction of a building it would not be appropriate to consider market value or sale value of the building as such value will be determined by extraneous factors such as value of site. therefore in respect of building the indemnity is provided on the basis of cost of reinstatement or reconstruction of the building. if the building before the fire was in a poor state because of age use exposure to the weather etc.the use of the building has also some influence on its deterioration. if heavy loads are carried the floor may become badly worn out. vibration from the machinery may affect the walls , floor, ceilings or piping attached to walls and ceilings.
MACHINERY
if the machinery destroyed is relatively new the cost of replacement less depreciation is not difficult to decide but complications and controversies could arise where. the machinery destroyed is old and out of date in industries where the rates of obsolescence and technological improvement are high. where machinery is to be replaced the insurers are liable for the cost of transporting the new machinery to the site and the costs of erection or installation . the amount of deprecation is always difficult to decide . a great of technical knowledge in the use and operation of different types of machinery is required on the apart of the surveyors to be able to property assess depreciation. thus maintenance is as important as age in assessing sepreciation.
HOUSEHOLD GOODS AND PERSONAL EFFECTS
these terms described all articles ordinarily and normally found and used in a household. the terms include furniture, cooking , utensils, domestics appliances, television etc in general it is the accepted practice that if these classes of property are lost or destroyed they can be replaced from the market and hence cost of replacement less deduction for depreciation is an adequate basis of indemnity. the fixation of indemnity for this class of property presents many difficulties and its indeed a delicate task for the surveyor.
SALVAGE
for the purpose of enforcement of the principle of indemnity salvage has to be taken into account
the term salvage is used to mean
1) all property covered by insurance which escapes destruction or damage from the operation of an insured peril.
2) the residual value of property which is partially damaged. this property may be reconditioned or sold in order to determine the amount of the loss.
3) the amount of money received from the sale of the damaged property in fact this may be better expressed as proceeds from the sale of salvage.
CONTRIBUTION
under common law the insured would be entitled to claim the entire amount of his loss subject to adequacy of the sum insured from any one insurer who would then be entitled under common law to collect the proper contribution from the other insurers who had covered the same property. the condition in the fire policy therefore provides that the insured shall be obliged to claim from each insurer his ratable proportion and thus save him from having to pay the entire loss and collecting from the other insurers. ratable proportion of the policy may be defined as that proportion of the loss as the sum insured under the policy bears to the total sum insured under all the policies.
SUBROGATION
if the insured is able to recover the whole or part of his loss from a third party responsible for the loss, then to that extent the indemnity payable by the insurers I seduced. thus subrogation is implied in all contracts of indemnity. subrogation also means that the insured right of recovery of loss from a third party responsible for the loss are transferred to the insurers who may recover the loss from the party concerned. the condition in the fire policy modifies the common law in one respect. the common law of subrogation accrues to the insurer only after the insured is indemnified in respect of his loss.th condition also provides that the insured shall render necessary and reasonable assistance to the insurer to recover the loss from any third party who was responsible for the loss. finally the amount of claim payable Is affected by the terms of the policy.
PRO-RATA AVERAGE
if there is under insurance the amount of claim is proportionately radices. there is a compulsory excess of 5% of each and every claiming respect of losses by lightning, in respect of architect’s etc fees and debris removal expenses the amount payable is one reimbursements basis of actual fees or expenses subject to the limits incorporated in the policy.