Section 7: The Standard Fire Policy

The Standard Fire Policy Perils & Losses Covered The removal coverage of the SFP is extremely broad and is, in effect...

"all risk coverage"

The Standard Fire Policy Perils & Losses Covered Usually, the insurer will pay the ACV or the appraised value of a loss. But there are two other options provided to the insured to settle a claim. They are:

1. Taking possession of all or any part of the damaged or destroyed property, paying the appraised value to the insured, and selling the property for its salvage value. 2. Repairing, rebuilding or replacing the property with material of like kind and quality within a reasonable amount of time.

The Four Main Sections of the Standard Fire Policy

1. The declarations 2. The insuring agreement 3. The conditions 4. The exclusions

The Four Main Sections of the Standard Fire Policy According to the SFP insuring agreement, what time does the policy term begin and end?

12:01 AM standard time at the location of the property

The Standard Fire Policy Perils & Losses Covered Hostile fire (unfriendly fire)

A fire that does not burn within its intended limits.

The Standard Fire Policy Exclusions The SFP excludes losses directly or indirectly by:

Acts of War Order of any civil authority Neglect of the insured; Theft except when property is removed

The Standard Fire Policy Perils & Losses Covered The SFP contains two conditional exclusions that will suspend the insurance under certain circumstances;

Any loss while the hazard is increased by any means within the control or knowledge of the insured; Any loss occurring while a described building intended for occupancy is vacant or unoccupied for more than 60 days.

The Standard Fire Policy Perils & Losses Covered Definition of a "fire"

Combustion, accompanied by visible light sufficient to produce a flame, glow, or incandescence.

Property Covered under the Standard Fire Policy What does the insuring agreement of the SFP limit?

Coverage to the property actually described in the policy.

Introduction to the Standard Fire Policy In the late 1800s, the New York Standard Fire policy was developed. Many other states adopted the form and it became the first what?

Form of insurance to have its wording standardized by law.

The Standard Fire Policy Perils & Losses Covered The SFP covers direct loss by removal...

From premises endangered during fire and lightening (perils insured against)

The Standard Fire Policy Perils & Losses Covered The insured's duties in case of a los sunder the SFP are to:

Provide the insurer with immediate written notice of loss. Protect property from further damage Separate damaged and undamaged personal property and put in the best possible order. Furnish complete and detailed inventory showing destroyed, damaged, and undamaged property, quantities ,costs, ACV, and the amount of loss claimed. Within 60 days submit a proof of loss stating the time and origins of the loss, the interest of all parties, the presence of either insurance, the value of each item, and other information that the policy specifically requires. Produce appropriate books & records. Exhibit what remains of damaged property Submit to examination under oath

The Standard Fire Policy Perils & Losses Covered What is not considered a fire based on the definition?

Smoke in the absence of light.

The Standard Fire Policy Perils & Losses Covered Lightning

The natural discharge of electricity in the atmosphere and does not include artificially generated electricity that can occur in a power surge caused by a storm.

The Standard Fire Policy Perils & Losses Covered The SFP with the extended coverage endorsement attached will cover the EC perils. They are:

Windstorm and hail Explosion (except of steam boilers) Riot Civil commotion Aircraft Vehicle Smoke

Introduction to the Standard Fire Policy The SFP specifically excludes losses resulting from explosion or riot, but if an explosion or riot is followed by...

a fire, any additional fire damage will be covered.

The Standard Fire Policy Perils & Losses Covered An insured may file a suit against the insurer to recover for a loss, but only if...

all policy requirements have been completed and only if the period of limitation tolled after the loss does not exceed 1 year from the date of the loss.

The Standard Fire Policy Perils & Losses Covered To address the issue of subrogation, the insurer may require form the insured...

an assignment of any right to recover against a third party.

The Standard Fire Policy Perils & Losses Covered If the insured would like to purchase an SFP with a deductible, he/she will need to....

attach a deductible form.

Property Covered under the Standard Fire Policy At least one additional form defining the the type of property being covered must be...

attached to complete the SFP contract.

The Standard Fire Policy Perils & Losses Covered When does the removal coverage apply under the SFP?

automatically for a period of 5 days.

Introduction to the Standard Fire Policy The language in the SFP is so vague that many insurers had to rely on...

case law in order to take a position or accepting or denying claims.

The Standard Fire Policy Perils & Losses Covered The SFP states that waivers must being in writing. However...

courts have also allowed agents to waive this provision and provide an oral waiver.

The Standard Fire Policy Perils & Losses Covered The SFP is considered to be named peril form because it provides....

coverage for direct physical damage by the three named perils fire, lightening, and removal.

The Standard Fire Policy Perils & Losses Covered Most SFP exempt inland marine from the requirement to provide...

equivalent or better coverage than the SFP.

Introduction to the Standard Fire Policy 28 states require that all property insurance policies written in their state provide coverage that is at least...

equivalent to the coverage provided by the SFP.

Introduction to the Standard Fire Policy In 1943, when the Standard Fire policy was revised, the 165-line policy became the...

foundation for the creation of todays property insurance policies.

The Standard Fire Policy Perils & Losses Covered If there is a mortgagee who has an interest in the property being covered by the SFP, the declarations will...

identify the mortgage, and a mortgage clause will be attached to the policy.

The Standard Fire Policy Perils & Losses Covered Despite the specified amount of insurance listed in the policy, the insured's insurable interest may also...

limit the amount of recovery.

Limits to Recovery under the Standard Fire Policy The insuring agreement of the SFP sets four distinct limitations on the maximum amount that the insured may collect for a loss. Recovery may not exceed the smallest of the following amounts:

1. The amount specified in the policy 2. The actual cash value of the property at the time of the loss. 3. The amount it would cost to repair or replace the property with material of like kind and quality, within a reasonable time. 4. The amount reflecting the insured's interest in the property at the time of the loss.

The Standard Fire Policy Perils & Losses Covered If the insurer cancels a policy that includes the mortgagee clause, they must provide the mortgagee with....

10 day written notice

The Standard Fire Policy Perils & Losses Covered When the 1943 Standard Fire policy was revised in the 1980s to simplify the language, the increase in hazard provision was dropped from the policy. There were other instances where the new simplified forms were not as favorable to the insured as the old form. Therefore...

28 states passed laws requiring all property policies to provide as much coverage under new simplified form as they did under 1943 form.

The Four Main Sections of the Standard Fire Policy The 1943 New York Standard Fire policy consists of 2 pages. Which sections are on the 1st page?

Declarations and insuring agreement- page 1 Conditions and Exclusions- page 2

Property Covered under the Standard Fire Policy Accounts, bills, currency, deeds, evidences of debt, money or securities are easily concealed or removed and their value difficult to determine therefore, they are....

not considered to be suitable for coverage under the SFP.

The Standard Fire Policy Perils & Losses Covered The loss payable clause states that after the insurer has received proof of loss and after the amount of the loss has been agreed upon, the insurer will...

pay the loss within 60 days (45?)

The Standard Fire Policy Perils & Losses Covered If the insurer cancels the policy, they are required to...

provide the insured with 5 days notice and any unearned premium will be returned on a pro rata basis.

The Standard Fire Policy Perils & Losses Covered The insured must comply with insurer's request as often as...

reasonably possible

The Standard Fire Policy Perils & Losses Covered If the insured and the insurer cannot agree on the ACV of the property, upon the written demand of the other, each party must...

select an impartial appraiser within 20 days. Any difference between the two appraisers, and only the differences, will be submitted to the umpire. Written agreement of any two of the three people involve in the process establishes the ACV & the amount of the loss.

The Standard Fire Policy Perils & Losses Covered If the insured cancels the SFP, any unearned premium will be returned on a ....

short-rate basis.

Introduction to the Standard Fire Policy The SFP does not provide coverage for...

the indirect losses such as compensation, or business interruption. However, these coverages can be purchased by endorsement and attached to the SFP.

The Standard Fire Policy Perils & Losses Covered The abandonment clause in the SFP, prohibits...

the insured from abandoning the damaged property to the insurer in order to claim a total loss.

The Standard Fire Policy Perils & Losses Covered The concealment and fraud provision of the SFP protects the insurer form the insured's dishonesty by allowing...

the insurer to declare the policy void if the insured willfully concealed or misrepresented a material fact, whether before or after a loss.

Introduction to the Standard Fire Policy 28 states of today's property insurance policies is where...

the language and coverages of the 1943 New York Standard Fire policy can be found today.

The Standard Fire Policy Perils & Losses Covered The SFP covers only direct losses caused by...

the named perils.

Property Covered under the Standard Fire Policy If the described property covered by an SFP is removed from the original location to protect from Perils insured against...

the policy will automatically cover the property for 5 days at another location.

The Standard Fire Policy Perils & Losses Covered The other insurance clause of the SFP permits the insurer to prohibit or other insurance by endorsing...

the policy, preventing the moral hazard of over indemnification.

The Standard Fire Policy Perils & Losses Covered If there is a mortgage clause attached to the SFP, the interests of the mortgagee will be paid first, limiting the insured's recover to...

their actual equity interest at the time of the loss.

Property Covered under the Standard Fire Policy The SFP does not exclude coverage for bullion or manuscripts, but do require...

they be specifically named on the policy.

The Four Main Sections of the Standard Fire Policy The SFP assignment clause states that if the property is sold, the policy may not be assigned to the new owner except...

with written consent of the insurance company.