Revision Fire Insurance

Which of the following is not a contract of indemnity?

• Fire insurance contract

• Life insurance contract

• Marine insurance

Answer explanation

Life insurance contract is not a contract of indemnity. Fire and marine insurance are.

Which of the following is capable of being the subject matter of a fire insurance contract?

• A building

• A person

• An animal

• A

What is a cover note?

• Interim protection note

• Cover page of a fire insurance policy

• Cover page of a marine insurance policy

• Schedule of a fire insurance policy

What is the correct sequence of events?

• Proposal- Underwriting - Issuance of policy - Happening of risk event - settlement of claim - subrogation

• Proposal- issuance of policy- settlement of claim- happening of risk- underwriting- subrogation

• Subrogation- issuance of policy- settlement of claim- happening of risk- underwriting

• Underwriting- proposal - issuance of policy- happening of risk- subrogation- settlement of claim

In case of the loss being attributable to a fault of a third party, the right of the insured to legally proceed against the third party stands transferred to the insurer after the insurer indemnifies the insured. This principle is known as ----------.

• Doctrine of subrogation

• Doctrine of contribution

• Doctrine of indemnity

• Doctrine of reinstatement

If the same property is insured with two different insurers, which principle will come into play at the stage of settlement of claim?

• Principle of subrogation

• Principle of contribution

• Principle of reinstatement

Answer explanation

The insurers will be liable to pay proportionate to the sums insured with them.

Rita insures her house against fire with three insurance companies, A, B and C for different sums. The house gets destroyed by fire. She approaches A for settlement of the entire claim. A pays the entire amount (covering for the shares of B and C as well). Can A recover the shares of B and C? If yes, from whom can A recover such contribution?

• No. A cannot recover the sums because A willingly paid up for all three insurers.

• Yes. A can recover it from Rita.

• Yes. A can recover it from B and C.

Answer explanation

Doctrine of contribution

In case of under insurance, the liability for the uninsured value of property will be borne by the insured himself. A clause providing for this is called -------.

• Average clause

• Reinstatement clause

• Subrogation clause

• Warranty

Which of the following is generally an excluded loss in a fire insurance policy?

• Depreciation value

• Damage by smoke and scorching

• Damage caused by water used for extinguishing fire

• Damage done by fire brigade in execution of its duties

Answer explanation

The depreciation in value to the remainder of the subject matter due to damage caused by fire is generally excluded from the purview of losses that are indemnified under a fire insurance policy.

Tyler inherited his grandfather's colonial era mansion in a beach town in Kerala. He is very fond of the house because his grandfather had, before he passed away, specifically asked him to take care of the house. Tyler insured the property against fire through an unvalued policy. Unfortunately, the mansion catches fire and gets destroyed completely. At the time of valuation, Tyler wants to add 25% of the market value to the calculation to account for the sentimental value he has for the mansion. Will he be permitted to add such sentimental value while estimating the value of the property for the purpose if indemnity?

• Yes. It is Tyler's only way to remember his grandfather.

• Yes. But 25% is steep.

• No. Because sentimental value is not considered for valuation of subject matter.

Answer explanation

Only the inherent value of the subject matter is considered. Sentimental value is not capable of exact estimation. Market value or value of reinstatement will be considered for valuation, and not sentimental value.