Published 8 March 2019, The Daily Tribune
After the seemingly dragging month of January and surprisingly breezy February, we need not be reminded that we have reached chapter 2019’s Q1. The scorching heat of the sun could tell us that indeed, March has come. Wailing sirens signal that it is already Fire Prevention Month.
Fire prevention awareness campaign could only guarantee us so much. To be directly protected from the perils of fire, it pays to have a fire insurance policy. Fire Insurance is a subset of property insurance that is meant to replace and rebuild the property to the extent of the damage. It shall include insurance against loss by fire, lightning, windstorm, tornado, earthquake, and other allied risks, when such risks are covered by extension to fire insurance policies.
A fire insurance is not a mere additional expense in our payables. The peace of mind it provides knowing that we can pay for restructuring and rebuilding our property once the misfortune happens could be worth the premium one has to shell out.
The policy could cover buildings, household contents, leasehold improvement, machinery, equipment, and stocks. However, the coverage does not extend to jewelries and cash.
The Insurance Code pertains to two types of fire –friendly and hostile. Friendly fire is one that burns in a place where it was intended to burn and ought to be. This will not give rise to the liability of the insurer. In contrast, the insurer is liable for hostile file which is one that escapes from the place where it was intended to burn and ought to be. While the law treats of a friendly fire that has gone hostile, it maintains such distinction to avoid the moral hazard of the insured for his negligence in the use or management of fire.
Another basic concept in fire insurance involves alteration. The insured must be wary of these events as it could be a valid ground for the insurer to rescind the contract. Alteration requires the following: a) when the use or condition of the thing is specifically limited or stipulated in the policy; b) such use or condition as limited by the policy is altered; c) the alteration is made without the consent of the insurer; d) it is made by means within the control of the insured; e) it increases the risk; and f) there is a violation of the policy.
Fire insurance is tariffed such that insurance companies may not set premiums lower than that prescribed by law. The wisdom behind this is to prevent insurers from responding to market competition by lowering the premium too much that they will not have enough funds to meet their liabilities to claimants when the time of payment comes.
As to the extent of indemnity, Section 173 of the Insurance Code teaches us that if there is no valuation in the policy, the measure of the indemnity should correspond to the cost it would take the insured at the time of the commencement of the fire to replace the thing gutted and bring it back to its state prior to the fire. Meanwhile, the law also states that parties may provide for an option-to-rebuild clause if they so desire.
In fire insurance, there is no implied co-insurance such that the insured is required to bear pro rata the uninsured portion in the event of partial loss. Although, parties may stipulate to this effect. For instance, assuming Juan owns a property worth 10 million pesos and the policy has a co-insurance clause with a face value of 6 million. If half of Juan’s property gets lost or injured, the insured will only be indemnified to the extent of half of the value that is 3 million. Juan shall then bear the uninsured difference of 2 million in such a case.
Most of us would be familiar with the Story of the Firefly, as told by Teodora Alonzo to the young Jose Rizal. It is about a little moth who was itching to go near the flame for it became attracted to the bright light. Despite her mother’s warning not to approach the fire, the curious moth defied his mother causing its demise. We could think of hundreds of lessons from this anecdote—probably bravery, risk-taking, and prudence. In the same vein, it takes bravery and risk-management in deciding to get a fire insurance policy. At the end of the day, it is comforting that in some way, somehow, we are assured that even if we play with fire, we will not easily get burnt.
For comments and questions, please send email to cabdo@divinalaw.com
