ogee PAYMENT OF CLAIM ‘The insurer should be informed ebout the loss as soon as the loss occurs. On receiving the notice, the insurer appoints an assessor to examine the facts of the case and to determine the amount of Nablity. The assessor is an expert person having the ability and experience in handling claims, The assessor is empowered to act and make necessary arrangement on behalf of the insurer. He Boes 10 the site of fire and, personally, examines the damaged property and collects all available information. The assessor gels the idea of ‘the nature" and extent of the damage, the corigin and cause of fire, Usually, the assessor asks from the insured about the loss to avoid future dispute between the insured and the insurer. The insured is suggested to separate the salvage or undamaged part from the damaged part to reduce the possibilities of further damage and to evaluate the amount ofloss correctly. ‘Steps are taken to check that ()) the policy is in force on the date of occurrence ofthe loss or damage; i) the loss or damage is by a peril insured by the policy; Wid) the property affected by the loss isthe same as insured under the policy. (v1) notice of oss is received without undue delay. After the iniviai check up, a number is aioted to ine ctaum ana-entered in the claims regyste. A separate docket is opened for filling the claim papers and a copy of policy. The face of the docket provides for printed columns for incorporating claim mimber. policy number, date of lose, et amount of oss, date of survey, name of the surveyor, etc. A claim form is issued to the policyholder, The claim form requires the following information: (0 Full description of circumstances ofthe loss suchas date of loss time, the place of fre, (i) Cause of fire. (ii) Particulars of the property affected by the loss such as description, value atthe time of fire, value of salvage and the claim amount. (#) Statement of other insurances on the property, name ofthe insure, the policy number and the sum insured, (9) Sourel value ofall the property The claim is recorded in the docket of claim, where facultative reinsurance is involved, an advice ofthe loss is sent to the insurers ‘The survey report of the assessor contains the following information, {0 Cause of toss: Its necessary to know whether the fire was caused by an excepted peril or was ‘aused by the negligence of a third party or there was any evidence of fraud, So, the cause of fires clearly obtained. Often the exact cause and origin of fire cannot be accurately established, In such cases the available evidence will have to be carefully examined to supporta plausible cause, aa(ii) The amount recommended for payment which is determined on the basis 0: current marnet value and underinsurance. {iil) Detail and value of salvage. The method to dispose it of. (iy) Details of expenses involved in extinguishing fireand salvage corps charges. () The position in respect of compliance with the warranties. (vi) Apportionment of the loss and expenses among the insurers where there are more than one insurer. (vi) ‘The assessor can judge whether the fire has been started at more than one place and whether it isa case of arson. He will inquire whether there is a breach of warranty or negligence on the part ofthe insured, (iit) The exact amount of loss payable by the insurer. The presence of the average clause in the policy will determine the amount ofloss payable. (On receipt ofthe claim form duly completed and the survey repor, the claim is processed and, ifitis in order, a discharge voucher isto be signed by the insured. The amount of loss payable by the insure is usually settled by agreement between the insurer and th insured otherwise the matterhasto bbe referred to arbitration. Market value of the damaged property is usually taken into account calculating the amount of loss. Sometimes, the cost of replacements considered forthe puropse. But, it is prevalont only in advanced countries because the insurers have well-equipped staff of replacement. . Before the cheque in settlement ofthe claim is released, the payment is recorded in the claims register and the claim docket. tis essential thatthe salvage recoveries should be correctly recorded in the claims register. The payment is recorded in the relative policy file and the sum insured is reduced by the amount of the claim, The sum assured can be reinstated on payment of proportionate premium from the date of reinstatement of the sum insured to the date of expiry of the policy. When the amount of loss is estimated to be small and the cost of investigation i disproportionately high, the survey is dispensed with and the claim is processed and settled on the basis of the complete claim form. When the insurance is on co-insurance bass, the surveyor is appointed by the leading office. Each co-insureris sent a preliminary advice of the claim followed by a copy of the final survey report ‘which indicates the apportionment of the loss among the co-insurers. Generally the leading office settles the entire loss and recovers the proportionate shares of the loss and expenses ftom the co-insurers, Salvage Corps Fire Salvage Association was incorporated in 1925 as a company registered by guarantee and the insurance companies are members of the Association. The main cbjects of the Association aré to provide a fully trained corps to salvage materials from the buildings on fire, to protect them from ‘water damage, to restore them to serviceable conditions aftr fire fighting operations are completed, “The corps also renders following services to the fire sub-committee, Bombay, ofthe Tariff Advisory Committee. 1. Checking the fire hydrants inthe Cotton Green Storage area. 2, Inspection of sprinklers in the godowns in the Cotton Green area. 3. Training ofthe fire fighting squads in the textile mills. 4, Provision of facilities to the Fire Sub-committee to test fire sprinkler heads and other fire extinguishing appliances. 5. Reporting on unusual features observed on the premises atthe time of fire extinguishment.378 INSUHANUE rnin nine Application of Average Clause in Payment of Claim ‘hn insurance fs subject to the ontinary, oF Pro Rata condition of Average, ie, underinsurance, the Tbihy ofthe insurers i estrited to that proportion ofthe loss thatthe sum insured bears to he valve fhe property athe time ofthe destruction ar damage. The insurer's ibility inthe event of Siaim under patie subject to average the loss i assessed in the ordinary manne, but the amount payable is determined ater a comparison ofthe sim insored and the vale ofthe propery, Where finder-insurance exists, the liability of the insurers is Timited. ‘The Pro Rata Condition of Average “Whenever a sum insured is declared tobe subject to average, ifthe property covered thereby shall at ihe brcking out of any fice orate commencement of any destruction of or damage to such sroperty by any other peril hereby insured against the collectively of greater vale than shh Aum vere he th insure shall be considered as beinghis own insurer forthe diference an shall Bear a rateable share ofthe loss accordingly.” ‘he operation ofthe condition can be shown as below Rs, Sum assored 1,500 Loss 300 ‘Value ofthe property at the time of fire 1,800 . sum asured igs, “The insurer’ liability is Taxerneey 1500%300 = mo 7 R250 “Thus tne insured will bear Rs. $0 and the insurer will pay Rs. 250 “The insurers cannatbe called uponto pay tefl sum insured. the propery isttaly destroyed, there wil be 2 total loss under the policy CONTRIBUTION CContrib.cion sa voroltary ofthe principle of indemnity. It prevents the insured from receiving more Caaepe et amount of the loss. It applies where two or more insurance cover the same interes, the ame nubject matter against the same pil. There is no rightof conribution where the policies cover ‘Iiforent terest eg lessor and lessee mortgage, bailor and balee. Both policies must cover the stem ic respect of which a claim is made. One insurance may cover more perils than the other but Contribution will arise if both policies include the perils which has caused the loss. Pro rata contribution “The insurer shall not be liable to pay or contribute more than its rateable proportion of loss, The Jpreuns i by peo clam rom each insure, a rateable proportion of his oss. Rateable proporion of i patie is defined asthe proportion of he loss asthe sum insured under the policy bearsto theft sa insuted under al the policies. or example 1 Iftvo polices A and B have boon taken for Rs, 30,000 of a building respectively at RS, 10,000 from ‘Aand Rs, 20,000 from B and loss is Rs. 6,000. Te policy A will pay30,000 Total Rs 6,000 paid Example 2: Tf the value is Rs. 60,000 in the above example, the payment will be 10,000 Policy = 12:20 6,000 =Rs. 1,000 60,000 000 = 00= Policy B= Fp % 60 Rs.2,000 z Total Rs 3,000 In this case insured is not paid full amount of loss because of underinsurance Example3 In the example | ifthe insured value ofthe building is Rs. 20,000, the payment ismade by 10,000 ic == «6,000: Policy A = 35 000% Rs, 3,000 20,000. joy Be a x6, 000 Policy B= 39 900) 6,000 = Rs. 6,000 Total = Rs. 9,000 Here mor€ than loss (Rs. 6000) Le. RS.9000 is payable to the insured who will receive the payment only to theextent of loss i. Rs. 6,000 3000 icy A= oo x6,000= So Policy A= ppp %6:000 Rs. 2,000 6000 6,000 = Rs. 4,000 Policy B= 9000 ‘Actual claim = Rs. 6,000 Coinsurance ‘When a large ik is shared betes two or more insure, itis done on aco-insurance basis i. cach insurer accepts only a specified percentage of risks below: Apportionment sem Sar of Share company assured loss expenses ae? OR B . % Rs. Rs, ‘Total 100% Example ; ‘The sum assured Rs, 20,000 by A Co. and Rs, 40,000 by B Co. The amount is Rs. 12,000 and expenditure to extinguish ire is Rs, 6,000. The insurance companies will share the loss and expenses as below in proportion to their respective sum assured, Apportionment of Coinsurance ______ Apportionment of Cost _. insurance Sun Tare of Share of company assured loss expenses ~ Rs. Rs. Rs. A 20,000 40,00 2,000 B 40,000 8,000 4,000 Bo 40,000 8,009 25. Total 60,000 12,000 6,0020,000 19 o00= Rs. 4 00) Rs, 4,000 AS 40,000. 0,000 12,000 = 8,000 “Thus A.Co, and B Co, will share the loss and expenses. Special Condition of Average ‘Whenever a sum insured is doclaredto be subject to the special condition of Average then, if such ‘sum shall a the breaking out of any fire or at the commencement of any destruction of or damage to the property by any other peril hereby insured against, be less than three-fourths ofthe value ofthe property insured in that amount the insured shall be considered as being his own insurer forthe Gifference between the sum insured and te full value ofthe property insured at the time of such fire for at the commencement of such destruction or damage and shall bear a rateable share of the loss accordingly.” “This condition shall operate only if the sum assured is less than the three-fourths ofthe value of the property. Ifthe sum assured exceeds this proportion of the value at risk, the insured recovers, the full amount of his loss up to the sum insured ‘The assessor in the fire insurance deals with some typical tasks which are described in the following paragraphs. The assessor is also called ‘Adjuster’. ‘Task of Adjuster “The adjuster has to examine and collet the following information: () What poticies and agreement vovered the property at thetime of loss. Gi) Whether the property deseribed inthe policy isreally located and placed atthe described place. Whether property had heen removed atthe safer place atthe time of loss. (i, The nature and extent of the insurer’ interest in the property. (iv) Loss occurred aftr the commencement and before the expirationof the contract (¥) Whether loss was the direct result of fire or other insured perils. (vi) Whether any part ofthe loss was caused directly or indirectly by enemy attack, military offence, ete. (vif) Whether the loss occurred while the hazard was increased by any means within the control or knowledge of the insured, (ii) Whether before or after the loss the insured wilfully concealed or misrepresented any material facts “The adjuster must do the following: (0) Fix by agreement with the insured or by appraisal,the actual cash value of the property atthe time of loss and the amount of loss thereto. (i) Evchude from the claim, uninsurable property or excepted property. (it) Determine the extent ofthe application ofthe insurance and the contribution to be made by the insurer tothe loss. (js) If there are two or more policies covering the property, apportion the loss among these polices. (0) Sec that the requirements in ease of loss that are necessary to produce informative essentals to establish the status of liabilities under the policy or the value or loss ofthe property are complied vithbe taken by ine msuters, (vii) Investigate any disputed cancellation of the policy. (biif) Exercise the option to take all or any part of the property at the agreed or appraised value. (ix) Preserve any right of recovery from third partiesto the loss, PAYMENT AND DISCHARGE BY ADJUSTER ‘The adjuster should: (0 Meet the insured or the person who will act for him in the adjustment, discuss the loss with him and make any necessary examination of records. (Gi Examine his policy if it eannot easily be produced, the record of insurer's agents or broker's record should be searched. (Gif) Inspect the scheme of the loss and examine any of the propertystil in evidence. (iv) Examine available records or reports covering the occurrence of the loss, those of fie department, peril or salvage corps, police, etc. (9) Examine records or documents deeds or mortgages, contracts of sale, leases, ec. (v) Consider whether any insurance held by others should bear the loss or any part of it. (vif) Withdraw if the insurance is not liable forthe loss from contract with the insured and report to the insurer or have nonwaiver agreement. (vii) Estimate the situation and the probable results of adjustments. (=) Choose the method of adjustment used. ‘@) Make any necessary preparation for conducting the adjustment according to the method chosen. (Gd Negotiate an agreement with the insured as to value and loss, submit the disagreement. (ii) Check any claim for possible errors and omissions also for improper inclusion, of property. ‘Apply contract conditions and determine the sum for which any policy or contract is liable. (ziv) Forward to insurer with final report and supporting papers. (Gq) Account the salvage and its proceeds with the final report. WAIVER AND ESTOPPEL Waiver ‘Waiver is defined as the voluntary relinquishment of a known fig, .t. The waiver may be (i) expressed or (if) implied. An insurer is informed that a policy under which claim is made is void because the person insured had no insurance interest in the property; but still, the insurer is going to pay itas a ‘waiver. The example of implied or waiver by conduct is where after having learned of a misstatement on a proposal neverthless, in full knowledge accepts he insurer. Estoppel Estoppel is the legal bar raised by aperson’s own action against asserting aright that he once possessed ‘or making a choice that once was open to him. An insurer may be estopped from exercising its option to take all or any part of the property at the agreed or appraised value if it delays its notice to the insured that it intends to doso. When the insurer has soughtto fix the amount of loss through arbitration, it is estoppel from exercising its option toreinstate or replace. QUESTIONS 1. Discuss the procedure of settlement of fire insurance claims. 2._ Explain—Estoppel, Adjuster, Waiver and Estoppel.