Indian Institute of Insurance Surveyors & Loss Assessors, a Professional Institute of Surveyors organized a 3 day Seminar on “Fire Insurance” in the sylvan surroundings of Karl Kubel Institute, at Anaikatti Road, Mankarai, Coimbatore 641 108 from 18th Nov 2010 to 20th Nov. 2010. It was a residential programme and was well attended with more than 60 persons participating. The Oranising Committee comprising of Mr Vr Na Arunn, RK Elango, A Gnanakumar and others had taken lots of pain to ensure that the Seminar presented opportunity for all the participants to discuss and debate some of the challenges being faced by the Loss assessors and also showcase some of the unique cases handled by them.
The agenda was neatly drawn touching upon all facets of Fire Insurance and on day 2 (Friday 19th Nov 2010) – the first session sprawling for 2 hours was on “Fire Survey – Roll of Surveyors – What to do and what not to do on acceptance of Fire assignment”. This was handled by Yours Truly.
The Organisers had prepared a nice course material and I had submitted a paper on the article assigned. It was novel way to ask an Insurer as to what the Surveyor should do or otherwise on acceptance of a Fire survey assignment.
The lecture was slightly different and was not a mere representation of the paper submitted. It started with a video on ‘ship on fire at midsea’ and was widely interspersed with choice photos and some questions which evoked good interaction and made the participants ponder on wider perspectives egging them on the need to look for the minutest details and keep on open mind on balance of probabilities which is the very essence on analyzing the cause and nature of loss.
Personally, I felt very happy in the midst of 60 odd best minds which had between them resolved thousands of claims and had the knack of brining about conclusion to some difficult problems.
Here is a gist of the paper submitted to the Fourm.
Regards – S. Sampathkumar.
Good morning to you all and am very happy in midst of this august house. I understand this to be a programme designed to refresh the Surveyors on various aspects of Fire Insurance. Whether an Insurer is the fit person to talk on what the Surveyor need to do on an assignment is left to ………… choice !!
In its strict sense, a fire insurance contract is one: 1. Whose principle object is insurance against loss or damage occasioned by fire. 2. The extent of insurer's liability being limited by the sum assured and not necessarily by the extent of loss or damage sustained by the insured and 3. Insurer has no interest in the safety or destruction of the insured property apart from the liability undertaken under the contract. The golden rules determining the admissibility can be summarized as : the policy being in force; peril causing the loss being an insured peril; property damaged or lost being the subject matter of insurance.
When fire strikes, lives are suddenly turned around. Often, the hardest part is knowing where to begin and who to contact. That is for the property owner. From the other side – when you start, are you sure of what is expected of you and what is the scope of your work ? For reaching any destination, one needs to be sure of one’s aim and the means of reaching it. ………………………………..
Communication and technology have changed the way claims were intimated, surveyors were appointed and the conduct of survey. From human angle, it is not always safer to conduct survey immediately after the fire, though this is the time when you can collate lot of material evidence. From an investigating angle, it would help all if the trail of fire could be
observed. The loss of life and property by fire most commonly occurs due to ignorance about the nature of fire and its behaviour, in circumstances that normally appear perfectly harmless.
The strategist should think about the nature of fire, the performance and structure of materials and the behaviour of people. In most countries, it is unlawful to occupy a new building unless it complies with the Building Regulations and Fire Precautions. A completion certificate also would be mandatory. Just imagine the situation here !!!
……………………………
The founding principle of proximate cause speaks of the ‘active efficient cause that sets in
motion a train of events which brings about a result, without the intervention of any force started and working actively from a new independent source’…………….. As you would know, Causation is the "causal relationship between conduct and result".
Fortunately, most of the policies are standard contracts – there are variations though. The special features of such contracts will have to be studied by you before you decide on assessment and liability aspects. Recently, in UK, Insurers have concluded that the effects of climate change, the frequency and scale of recent claims, and the inadequate provision for national flood defences are a major problem and flooding can no longer be considered an
uncertainty. In Gulf markets, Fire Policy covers only losses arising out of Fire or lightning. In US standard policy does not cover floods, there is Standard Flood Insurance policy as provided by their National Flood Insurance Act………………………..
Though Standard Fire and Special Perils Policy lists out the perils insured, the definition and interpretation have had wider ramifications. For a proper understanding, here are some characteristics of Fire Insurance contract :- it is a personal contract and does not ensure the safety of the insured property; the contract is entire and indivisible. When there is breach of duty in one the Insurer can avoid the contract as a whole, cause of fire is immaterial.
The fire need not originate in the insured premises. However, the surveyors are to investigate whether the fire was occasioned by negligence, was willful and whether fire is due to any cause falling within the exceptions of the contract.
This is one of the most honoured professions. What is expected of you is not simply assessment or quantification of loss. Much more is expected of this profession – it should be analysis on the cause of loss, nature of loss, extent of loss, possible ways of avoiding recurrence, the assessment of the loss / damage, comment on the admissibility as also observance of warranties and conditions adjusting it within the insuring terms and conditions.
In arriving at the Indemnity, your expertise is required in deducting those which are not indemnifiable. For the outside world, the Fire Claim adjustment should be the easiest of all – a property is destroyed, you obtain the value and pay for it. But even in a TL scenario, you need to check on who your insured is : Trader, Manufacturer or Intermediary, whether it is
Building, Machinery or Stock and in case of Stock, whether it was raw material, stock in process, stock undergoing process, final product – the stage of its production and so on. ………………………………………..
Upon accepting a survey assignment, you are expected to observe, record and present the following : - Circumstances and cause of the fire; Occupancy and situation of the premises in which the fire occurred; Insured's interest in the insured property; Other insurances on the property;. Value of each item of the property at the time of loss ; Amount claimed. The primary function of the surveyor, is that of an expert, to determine the cause and extent of
damages. From his knowledge and good judgment, he recommends the measures to be taken in regard to the same in the best interests of all concerned. It involves not merely an examination of the damaged property and a snap judgment as to causes etc., but requires closer inquiry into no. of factors which may seemingly have, at the time, only a remote bearing on the case. After determining several factors and weighing them, each needs to be
assigned their proper place and value. In sum and substance, the Surveyor needs to :
a) Inspect the damaged item (s)
b) Correlate the damaged item with the subject matter insured
c) find out the proximate cause
d) check for conformity of warranties / conditions
e) arrive at the extent of loss and assessment thereupon
f) approve disposal and assist in realization of salvage
g) check aspects of depreciation
h) find our VAR for checking adequacy
i) check for coinsurance
j) policy excess application
k) check whether any subrogation exists.
……………………………………………………………
In a survey no fact or circumstances is too trivial. The conclusions and recommendations must be based on the observations made at the time of inspection and thereafter. In formulating these one could be surprised at the train of thought which may be set in motion by one seemingly irrelevant fact. In the end it, coupled with others may lead clearly to an entirely different conclusion than would have been reached if it had been ignored. The visit is to be seen as the most valuable opportunity to gain information on the nature of risk, profile of customer and of the loss. The most embarrassing position could be that of a wrong conclusion and unwise recommendation through lack of diligence in the work. Also the
surveyor should never be influenced by extraneous factors. You stand or fail on your own work.
Joint survey : (don’t worry this is not what you think of !) when surveying a damaged property, particularly at the first examination it is advisable that the property owner or atleast a responsible representative of his be present. There is nothing mysterious about making a survey of damage and on the whole, the greatest degree of open handed dealing will work for the best interests of all…………………………..
Factually, the assured’s loss and his claim should be based on the condition of the damaged portion of the property. The sound portion does not enter into the assessment and logically sound portion needs to be separated. The surveyor’s alacrity in approving and assisting disposal of badly damaged property and in reconditioning will help minimizing the claim and increasing the salvage value of the damaged property. The centric point is identifying the Cause of loss / damage. …………………………………
Measure of Indemnity : In determining the value of property damaged or
A typical evaluation from your side is on potential fraud indicators which
may include ………………………………..: But even in circumstances where there are one or
more of these, the loss could still be genuine.
Finally, the success will be in capsulating all the good work into the report without being too elaborate or too curt. The report needs to be clear, complete and concise. The exact form must necessarily vary with circumstances. It must represent facts and circumstances as observed and can represent the balance of probabilities but should not represent any
presumptions.
The annexures would be the ones which would expand the findings or documents evidencing the findings. These will enable better understanding of your report by people at desk who had no advantage of visualising the loss or the damaged property as they stood and will also ensure placing things in proper perspective, if they are challenged in any Forum or in a Court of Law.
With regards
S Sampathkumar
The author is Claims Head with a leading Private Insurer with more than 25 years of
experience in Insurance. The views expressed are that of the author and does not represent the views of the Company.
Fine articulation - Gupta
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