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General Business FIRE INSURANCE COVER PROVIDED BY STANDARD FIRE POLICY. A standard fire policy provides insurance cover against the following perils:- (a) Fire (limited cover)- limited by the exclusions stated in the policy. (b) Lightning (unlimited cover)- lightning damage from any source, whether accompanied by rain or not is covered. (c) Explosion (limited cover)- limited to the cover provided in the policy. For in stance, explosions arising from gas used for commercial purposes e.g. oxy-acetylene gas used for welding and explosion arising from any gas works used for domestic purposes, lighting or heating the building is not covered. It must be noted here that the standard fire policy covers the following losses which may be incidental to fire although there must be actual fire before cover can be allowed. i. Property damaged by water or other extinguishing agents used in extinguishing the fire. ii. Property that may be destroyed or blown up to prevent fire spread. iii. Damage done by fire brigade in an attempt to extinguish or contain the fire. iv. Damage to property occasioned by falling walls or part of a building in which fire occurrence has taken place. v. Smoke damage if preceded by fire. No cover if there was no fire as defined in the policy e.g. malfunction of lantern or gas lamps. EXCLUSIONS: -As can be deduced from the scope of cover of the standard fire policy described above, the policy excludes all losses occasioned by perils outside those of fire, lightning and explosions, to the extent as given above. However, with additional premium paid by the insured, some of the peril can be added through policy extension. See special perils endorsements in appendix A1. SPECIAL PERILS The standard fire policy can be extended to cover four other groups of special perils: by payment of additional premium: - (a) Perils of chemical nature: - e.g. explosion, spontaneous ignition or fermentation. (b) Perils of nature: - e.g. earthquakes, bush fire, tempest, storm, flood, cyclone, typhoon e.t.c (c) Social perils:- perils arising as a result of communal living e.g. riot, strike and civil commotion, malicious damages e.t.c. Note that cover does not exist yet for war damage, rebellion or civil war damage. (d) Miscellaneous perils: - e.g. sprinkler leakage, impact, aircraft damages, bursting or overflowing of water tanks, etc. CONDITIONS: Usually there are three sets of conditions in any insurance contract. These include: - (a) Conditions precedent to the contract (b) Conditions subsequent to the contract (c) Conditions precedent to liability. FIRE CONSEQUENTIAL LOSS POLICY This may also be referred to as: (i) Loss of Profit Insurance, or (ii) Business Interruption Insurance Whatever name it is called, the policy provides cover for the insured against any financial loss following fire, causing an interruption to the insured’s business. Generally, an insured can obtain a fire policy without a loss of profit insurance but it must be noted that the company will not grant consequential loss cover without fire policy covering the same subject matter of insurance. The presence of fire policy called the “Material Damage Policy” is a condition precedent to a valid contract of consequential loss policy. However, the material damage policy need not be insured with us. Evidence of it’s existence with another insurer must be shown and ascertained by the underwriter. It is advisable that both are placed with us for underwriting purpose. COVER PROVIDED The items covered under a consequential loss policy are: - (a) Gross profit: Addition of: - (i) Net Profit (ii) Standing Charges (iii) Increased Cost of Working (b) Wages. (c) Auditors’ fees and other professional charges. CONDITIONS: The conditions are as obtained under the material damage policy. Except for the Material Damage Proviso, which stipulates that before any loss is paid under the consequential loss policy, the fire policy (MDP) insurer must have accepted liability or paid. RATING: The rating in consequential loss policy is based on the rates applied to the Material Damage Policy (Basic Rate) affected by a multiplier. CON loss Rate = SI x BR x M Where SI = Sum Insured BR = Basis Rate M = Multiplier N.B. The multiplier for each element (Gross profit, wages and auditors fees) varies. Multiplier for (i) Gross profit – varies according to the indemnity period selected. (ii) Wages - varies according to the indemnity period and reminder percentage. (iii) Auditors fee – fixed at 125% For the appropriate multiplier rates see appendix A6. Example of CON Loss Rating. |
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