Page 193 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes
Besides, the destruction caused by the fire, extensive loss is expected on account of collateral
damage caused by fire fighting. Even if goods are not totally gutted, the chemicals that the
fire-fighters use to douse the flames would themselves render the products unfit for
consumption.

An importer of exotic spices faced with losses of ` 2 crore, said that his goods were fully
insured. Out of the 2,000 clove bags kept in the custom bonded area on the fifth floor, 330
bags valued at ` 60 lakh belonged to him. “I had about ` 1.4 crore worth of cloves, black
pepper, cassia, cubebs (belonging to the pepper family but not as pungent) and long
pepper stored in the non-bonded areas of plant II. Since the fire has been fiercest on the
3rd, 4th and 5th floors of the plant, my cumulative losses tot up to ` 2 crore,” he said,
adding that only 10% of the traders probably had their goods insured.
Another downer for the salvage operations is the spreading of the fire once the doors of
the cold storage are opened as oxygen entering the place supports combustion. Fire-
fighters are reportedly hopeful of bringing the situation under control the next 48 hours
after which it would become possible to assess the extent of the losses at the 8,500 tonne
capacity plant.
Question
Find out the proceedings of this case with the help from the internet and prepare a
presentation.

Source: http://articles.economictimes.indiatimes.com/2006-11-14/news/27462173_1_insurance-
companies-cold-storage-black-pepper

10.6 Summary

A fire insurance policy cannot be assigned without the permission of the insurer because
the insured must have insurable interest in the property at the time of contract as well as
at the time of loss.

‘Fire’ which is used for domestic or manufacturing purposes is not fire as long as it is
confined within usual limits. In the fire insurance policy, ‘Fire’ means the production of
light and heat by combustion or burning.

The contract should be backed by the presence of consideration. The premium paid by the
assured to cover the risk is the consideration by the assured and the promise made by the
insurer to pay the compensation for the damage by fire is the consideration from the
insurer.

Valued policies are not generally issued in fire insurance. They are usually issued on
pictures, works of art, sculptures and such other things whose value cannot be easily
determined.

Floating policies cannot be issued to cover goods in unspecified buildings or places, nor
can they be extended to more than one town or village. Floating polices are always subject
to an average clause.
A fire policy usually does not cover loss occurring as a result of riots, civil strife, rebellion,
etc. But fire insurance companies do sometimes issue policies of a comprehensive nature
to house-owners. Such policies usually cover the risks such as fire, explosion, thunderbolt,
lightning, riots, strike etc.

An insurance company transfers all or a portion of its risk exposure under an insurance
policy to another company.

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