FIRE CLAIMS PROCEDURE

a.
b.
c.
d.

ON RECEIPT OF A CLAIM INTIMATION THE

FIRST STEP IS TO VERIFY THAT:The policy is in force.
The perils covered under the policy are the
same as the perils under which the loss is
reported.
The items of properties affected & the location
involved are the same as covered in the
policy.
The interest involved is the same as referred
to in the policy.

a.
b.
c.
d.

After checking the policies, the claim is

registered & a claim number allotted.
After registration of the claim, a claim form is
issued to the insured for completion & return.
The claim form contains the following
information:Name of the insured, policy number &
address.
Date, time, cause & circumstances of the fire.
Details of damaged property.
Sound value of the property at the time of fire.
Where the insurance consists of several
items, a declaration is required of the value of
each item under which the claim is made.

e. Amount claimed after deduction of salvage

value.
f. Situation & occupancy of the premises in
which the fire occurred.( Location)
g. Capacity in which the insured claims, whether
as owner, mortgage or the like.
h. If any other person is interested in the
property damaged ( Insurable Interest).
i. If any other insurance is in force upon such
property.(Contribution)

 If the amount of the loss is small within

Rs.20,000/- ( Excld. LOP) & the claim is simple
& straightforward, it is investigated by an official
of the company & thereafter, processed &
settled on the basis of the claim form &
investigation report.
If the loss is known or expected to be large,
then independent Loss Surveyors & Loss
Assessors are assigned the job of investigation
& report on, inter alia, the cause & extent of
loss.
After completing his initial investigation, the
surveyor submits a preliminary report which
indicate briefly:-

i. The date of loss.

ii. The situation at which the loss occurred & the
details of occupancy at the time.
iii. The cause of the loss, if ascertainable.
iv. A preliminary estimate of the loss or damage.
v. Any other relevant information.
There after a final report is submitted giving
full details of the adjustment of the loss & the
Surveyors opinion on the question of liability
under the policy.

 This final report is scrutinized along with other

documents &, if everything is in order, a
discharge voucher is sent to the insured for his
signature & return, on receipt of which a
cheque in settlement is sent.
This discharge voucher is to be signed by all
the persons named in the policy as the
Insured, & the cheque is drawn in favour of all
the parties mentioned in the policy. If the policy
contains the Agreed Bank Clause discharge
given by the bank is final & the amount of the
claim can be paid directly to the bank.

 In very large losses,if the insured desires & the

Surveyor recommends, payment of on
account settlements where the insured has
already spent or is in the course of spending, on
repairs, replacement, etc of damaged property.
This course of action is taken where the
liability under the policy is not in doubt and
the preparation of the final survey report will
take time for various reasons.
Where very large losses are involved, the
reinsurance arrangements provide for cash
loss settlements. If the loss amount exceeds a
pre-agreed figure, the insurers are entitled to
recover the reinsurers share immediately on
payment of loss to the insured.

 When the insurance is on a co-insurance

basis, the Surveyor is appointed by the leading
office. Each co-insurer is sent a preliminary
advice of the claim followed by a copy of the
final survey report which would indicate the
apportionment of the loss among the coinsurers, & each co-insurer would send the
cheque for his share of the loss directly to
the claimant. Alternatively, the leading office
would settle the entire loss & recover the
expenses & proportionate shares of the loss
from the co-insurers.

Arbitration
This condition is inserted in the fire policy
which insists on reference to arbitration any
dispute as to the amount of settlement of
claims.
The salient point of this condition are:i. Difference in respect of quantum (amount) of
claims are to be referred only to arbitration.
ii. Matters involving the liability under the policy
cannot be referred to arbitration.
iii. A single arbitrator is to be appointed in writing
by the insured & the insurer.

iv. If the Insurer/insured cannot agree upon a single

arbitrator then two arbitrators may be appointed in
writing, one arbitrator by the insured & the other by
the insurer, within two calendar months.
v. If either insured or insurer fails to appoint the
arbitrator the other party is at liberty to appoint, a
sole arbitrator.
vi. If there be any disagreement between the arbitrators
the difference is to be solved by Third Arbitrator
appointed by the arbitrators. The THIRD
ARBITRATOR decision is final & binding.
vii. The provision of Reconciliation & Arbitration act
1996, as amended from time to time is applicable.

 Condition Of Limitation
The liability of the insurer for any loss ceases
after expiry of 12 month from the date of loss,
unless the claim is subject of pending legal
action or arbitration.
If the liability for any claim is disclaimed by the
insurer & the insured has not filed a suit in court
of law, within 12 calendar months from the date
of disclaimer then the claim is deemed to be
abandoned & cannot be recovered thereafter.
In other words, the claim becomes timebarred.

a.
b.

c.
d.

Rights & Duties Of Insured

This condition lays down the duties of the
Insured in the event of loss or damage &
the procedure to be followed by him:Immediate notification of loss to insurers.
Submission of written statement of the claim
within 15 days of loss giving full particulars of
loss or damage & of property affected &
details of other insurers covering the same
property against the same peril.
Submission of all reasonable information &
proof in respect of the loss at Insureds own
expenses.
Declaration of oath about details furnished.

a.
b.

c.
d.

Rights Of Insurer
Under the condition, the insurer, on the
happening of the loss, is having rights.
To enter, take & keep possession of the
premises where the loss has occurred.
To take possession of or require to be
delivered to them any insured property on the
premises at the time of loss.
To deal with such property by way of removal,
sorting, examination, etc.
Sell such property for account of all
concerned.

 The condition specifically provides that the

exercise of these power does not diminish the
insurers rights to rely upon any of the
conditions of the policy to repudiate liability.
The condition also provides that all benefit
under the policy shall be forfeited if the insured
or any person on his behalf (1) shall not comply
with the requirements of the insurers; or (2)
shall hinder or obstruct the insurers in the
exercise of their powers.
The condition provides that the insured has no
right to abandon the property of the insurers
whether taken possession of by the insurers or
not.

 If some property is saved from loss i.e.

Salvage the value of such Salvage is deducted
from the amount of claim. Even if the Salvage
has no value & a total loss settlement is
made the Insured cannot abandon the
salvage.
Miscellaneous Legal Aspects
The doctrine of estoppels is closely connected
with the doctrine of waiver. Estoppels is the
legal bar raised by a persons own action
against asserting a right that he once
possessed, or making a choice that once was
open to him.

 For example:- If the insurer has sought to fix the

amount of the loss through arbitration, it is Estopped
from exercising its operation to repair or replace.
In this context, the insurer has the right to enter &
keep possession of the insured premises where there
is a fire.
If insurers exercise these rights, it may lead to the
conclusion that a valid claim has been made & that all
that is required is to fix the amount of loss.
By taking & keeping possession of the premises, the
insurers may be Estopped from contending that the
claim is invalid through non-compliance with some
condition of the policy. E.g. failure to furnish proofs
amount of loss in the form of vouchers, receipts etc.

 Therefore, the condition is so worded as to

eliminate the question of Estoppels. The
condition provides that the exercise of the
powers by the insurers under this condition
shall not impose any liability upon the insurers
or affect their right to rely upon any condition of
the policy.
Amount Recoverable
The sum insured is the maximum limit of
payment & does not necessarily mean that it
will be payable even in the event of a total loss
of the subject matter.

 The operative clause of the fire policy states

that the company will pay to the insured the
value of the property at the same time of
happening of its destruction or the amount
of such damage or at its option reinstate or
replace such property or any part thereof,
provided that the liability of the company shall
in no case exceed in respect of each item the
sum expressed in the said schedule to be
insured thereon or in the whole the total sum
insured hereby, or such other sum or sums as
may be substituted thereof by memorandum
hereon or attached hereto signed by or on
behalf of the company.

a.
b.
c.
d.

The extent of indemnity is therefore subject

to two main limitations:
(1)Value of the subject matter of the
insurance affected. The value is calculated
taking into account the following factors:The value at the time of loss.
The value at the place of loss.
The real or intrinsic value excluding any
sentimental value.
Prospective profit or other consequential
& indirect losses are excluded.

(2)The sum insured under the policy for

the affected item.
a. The extent of the insureds insurable
interest of the property affected. In case
the interest of the insured is limited to only a
portion of the property damaged, the
indemnity will be paid only to the extent of the
insureds interest in such property.
b. The extent of value of salvage. In some
cases valuable salvage may be available for
disposal. The loss amount then will be settled
with the insured after deduction of salvage
value of the affected property.

Salvage
It is necessary to take into account salvage
while setting the claim for the enforcement of
the Principle of Indemnity. Salvage has
acquired different meanings in insurance
practice. The term 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 loss.

 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.
If the insured retains the salvage the loss is
indemnified net i.e. the gross agreed amount
of loss or damage, less the value of the
salvage retained by the insured.
Insurers may also take over the salvage if
the insured is unwilling to retain it or unable
to dispose it off. But the insured is not
entitled to demand that the Insurer shall
take over the salvage nor can abandon the
property to the insurers.

 Excess:- This means the insured will have to

bear a certain amount of the claim & in excess
of this amount the insurer will have to pay.
WHAT ARE WARRANTIES
Warranties in insurance contract are
stipulations imposed by the insurer because he
wants to ensure that the risk remains the same
throughout the currency of the policy and does
not increase.
A warranty is undertaking by the insured that: 1)Something shall be done( e.g Cargo be
packed in Double Gunny Bags)

 2) Something shall not be done( e.g that in

certain processes, no direct heat be applied)
3)A certain state of fact exists( e,g in burglary
insurance that ao intruder alarm system is kept
in good condition by regular servicing)
4)A certain state of the fact does not exit
( e.g.where no oils were stored and therefore not
charged for in fire insurance it would be
warranted that no oils be kept)

 Non Standard Claims

Where a breach of warranty or policy
condition arises & where such breach is of a
technical nature or is evidently beyond the
control or knowledge of the insured or is
not material to the cause of occurrence of
the loss settlement is considered after rectifying
the policy & collecting additional premium
where due. In settling the claim, a deduction
may be made from the assessed claim
amount equivalent to the extra premium due
for three years which have been charged had
correct information been available originally.

 Where the breach is material to the loss or where

an act of the insured has contributed to such a
breach in such cases if the insured has acted with
the best of intentions & has not consciously
committed the breach or where the legal question
of liability is in doubt payment may be considered
on merit of each case up to a maximum of 75% of
the assessed amount of loss.
Ex Gratia
Where there is a dispute with regard to the legal
interpretation of the policy condition or warranty
or the scope of cover, the legal advisers may advise
that considering the cost of litigation & chances of
success, it is desirable to settle the claim by
negotiation. Such settlements are termed Ex gratia.

 There are also cases where the property

damaged is either not insured or the policy
does not cover the particular peril causing
damage. The insured may be able to
demonstrate that such absence of cover was
purely through clerical error & that a well
established practice exists to effect full
insurance of all properties.
Claim may be considered in respect of such
exceptional cases on Ex Gratia basis. Exgratia settlement may be considered upto a
maximum of 60% of the assessed loss.

 Under Insurance ( Condition of Average)

To penalize the insured who does not insure property
up to its full value by a corresponding under payment
of claim. This can be written into an equation as
follows: Amount Payable= SUM INSURED /
X LOSS
VALUE AT RISK AT
THE TIME OF LOSS
Sum Insured Rs.5,00,000/Value at Risk Rs.10,00,000/-(On the date of Loss)
Loss Rs. 2,00,000/Amount Payable=5,00,000/10,00,000 X2,00,000
Rs. 1,00,000/-

 Concurrent & Non Concurrent Policy

Concurrent policies are those which cover
only the same classes of property in the
same situations & which do not include
property which others do not cover. For
example:- If Policy A covers stocks in Godown
for Rs.10,000 & policy B cover stocks in the
same Godown for Rs. 20,000 the policies are
concurrent.
Non concurrent policies are those which
cover part only of the property covered by
other policies or property not covered by
other It is essential however that there must
be some property common to all policies.

 Example:- Policy A covers cotton bales

Policy B covers cotton bales & Kuppas
Policy C covers cotton bales, kuppas & loose
cotton
Non-Concurrent Policies :The following example will illustrate the
concurrent policies method i.e. splitting the
sum insured:Total value at risk
On cotton Bales Policy A
Rs.1,00,000
On cotton Bales Policy B
Rs.50,000
On Cotton Bales Policy C
Rs.50,000
Rs.2,00,000

1.
2.
3.
4.
5.

For an account payment surveyor may be asked to

submit interim reports with recommendation &
confirmation about the admissibility of liability &
comments of observance of Warranties,
Conditions & Probable quantum of loss.
Processing of claims
Documents generally required for processing of
claims
Copy of policy
Survey report
Claim form duly completed
Police report
Can be Waived
Fire brigade report.
Do

 Police report & fire brigade report can be waived

where survey report does not cause any doubt on the
occurrence as well as extent of the loss.
In riot losses if the occurrence is in the public
knowledge final investigation report & fire brigade
report can be waived (FIR is a must).
Act of God Perils (AOG) claims
Newspaper cutting photographs & meteorological
report required
If incident is localized (Not in newspaper nor
recorded by meteorological department) incident
should be confirmed from local Govt./ Statutory
authorities & support the description of the occurrence
& the exact loss by photographs.

 While processing the claim attention may be

paid to the protection of recovery rights,
concurrent policies & financial institute
clause.
Disposal of salvage should be done on priority
basis for & on behalf of the concerned parties
even if the liability of claim is under
consideration.
Settlement of claims where all records
required for the assessment of claim
destroyed
Wherever possible duplicate accounting
records & other evidence may be created.


1.
2.
3.
4.

Records may be called for from

extraneous agencies like
Creditors of the insured who have supplied
the goods.
Bills drawn for sale of goods
In case of loss of fixed assets schedule of
fixed assets of previous audit may be
obtained from auditors.
Previous sales tax return, previous income tax
return & statement of stock lodged with the
banks to arrive amount of loss.
Settlement of such losses will be normally
negotiated one.

Common Requirement
for all types of Claim

Claims
Intimation

Policy

Claim
form

Survey
Report

Specific
Requirements
Fire &
explosion

1.FIR
2.FIRE
Brigade
Report

Earthquake
Fire
Impact
&/or Shock RSMTD
Damage SFTI perils,
Lightning

FIR

1.Meteorologiocal
Report
2.In the absence of
Meteorological
report
Local bodies
a. Certificate
b. Cutting of
newspaper

Police
Report

 Co Insurance
A decision by the leader regarding claim settlement
shall be final & binding on the coinsurers.
The leader will intimate to the coinsurer details of
claim settled by him with copies of all relevant papers
& documents.
The coinsurer will settle his claim within 15days from
the date of receipt of such intimation from the leader.
In case of a claim requreing board decision the
decision taken by the board of leader shall be binding
on the coinsurers (no separate need for the
coinsurer to approach their boards for decision in
such claims)

 Close Proximity cases

When loss occurs within 5 days of the date of
inception of the risk (new insurance or where
there has been a break) detailed investigation
should be done.
Rectification of policy after a loss is
reported for reasons other than breach of
condition/ warranty
Where rectification involves collection of
additional premium the additional premium may
be charged only on the affected policy period in
within the claim has arisen.

 Rectification can be done by the authority

competent for settlement of claim.
Repudiation of claims
The competent authority to settlement claim
would be the authority to repudiate the claim.
Letter of repudiation may state the reasons &/or
policy condition under which it is repudiated.
Reopening of claim files
Reopening of claim file can be done by the
authority one step higher than the claim
settlement authority.

THANKS
ANY QUESTION ???