Damage Caused by the Insurers Taking Possession of Insured Premises & Judicial Opinions

Dear Friends,

As you are aware that insurance company in case of property insurance take possession of insured property or premises to safe the same further damage and to minimise its claim payment. It is right of every insurance company and the insurer to take all steps to save the insured property as property not insured.

Where an insurance company , acting under powers contained in the insurance policy , have taken possession of the building which has been damaged by the fire , in order to minimize the damage by salvage operations , they will be held liable for the damage done during their occupation of the premises, the loss failing to be determined at the time when they give up possession to the owner , and not at the moment when the fire was extinguished.

Levy Vs. Bailey(1831) 131 ER 135- the loss by theft during a fire is covered as a fire risk.

“ The policy usually describes the risk insured against in  broad terms, but almost every policy contains certain exceptions the effect of which is to take outside the operation of the policy, either things for destruction of which the insured could otherwise fall within the policy. Certain kinds of articles, on account of their special value , or on account of their being liable to danger and destruction, are either not included in the policy or , if included , are charged special rates of premium.”

IN TAUNTON VS. ROYAL INSURANCE CO. (1864) 33 LJ CH406 IT was held that – it is within right of the company to pay for the loss, even though it is caused by an excepted peril, provided such payment is in the interest of the business. Fire policies issued by the insurers , provided that the company would not be responsible for any loss by explosion except explosion by gas. A vessel laden with Gun Powder caught fire , exploded and the concussions of the air caused considerable damage to the property, especially to the windows and the glasses of persons who had affected insurance with the company. The directors had decided to pay the losses occasioned and one of the shareholders filed a suit , seeking an injunction to restrain the directors from so applying the funds of the company for payment of such claim. The Court held that assuming the company to be not legally liable, yet as the evidence proved that payment of such losses as to favour , was in accordance with the course pursued by other companies in the particular case and with the usual custom of fire insurance companies, the directors must be regarded as having acted bona fide within the limit of their authority, for the benefit of the company , and hence suit was dismissed.

PLEASE NOTE THAT –  the exceptions may relate to certain causes, for which the insurers are not prepared to accept the liability , for instance , loss or damage cause, by military, war ,or usurped power, or riot or civil commotion is excluded.

CIVIL COMMOTATION- means “ an insurrection of the people for the general purpose of mischief , not amounting to a rebellion , since no power is usurped”. It also means that a sudden, short period noise , confusion or excited movement. It is a condition of civil unrest or insurrection or an agitated disturbance.

IN LONDON & LANCASHIRE FIRE INSURANCE COMPANY Vs. BOLAND(1924)AC 836-  Lord Finlay deals with the word “ Riots” as follows “ We have been told that the word riot here should not read in its legal sense. In the course of arguments I myself asked several times if we were not to take legal sense what then was the sense in which the word was to be said ————, I do not see how it can be read satisfactorily in other way.”

Lord Finlay refused to subscribe to the view that the mere fact that the crime of theft itself contains the element of riot at law , does not exclude the right of the assured under the policy. “Why should it( the proviso) apply only if the riot is a collateral event, during which the theft takes place , and not apply to a riot, one of the objects of which , at all events, was the actual committing of the theft. Riots is to be understood in its strict sense and not in its popular sense.”

PLEASE NOTE THAT  where loss or damage occasioned through riot or commotion is excepted from a policy of insurance , if the loss took place in consequence of a civil commotion , it is not necessary to prove that such a commotion was at the actual time and place at which the loss occurred in order to bring the case within the exception.

IN COPPER Vs. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CO.(1923) LJPC 168- A motor car, belonging to the appellant and insured with the respondent company , was taken with the show of force under circumstances , not such as those of ordinary theft , at a time when there was Civil Commotion in the neighbourhood, though not at the actual place, and there was evidence that motor cars were much used by those engaged in such commotion , it was held that the loss occasioned through Civil Commotion.

CONCLUSION:

If a loss is capable of being covered by different kinds of insurance, a policy may except loss which may be occasioned by the risk insured against , by a different specie of insurance. It means suppose a theft may be covered by an ordinary insurance policy , and it may be expressly provided in that policy that theft occurring during fire is not covered ,for such theft falls under an ordinary fire policy.

If the loss is directly occasioned by a fire , which can be attributed to an excepted cause, the insurers are not liable. It is possible that the language of the policy may exempt the insurers from the liability , even where the loss is remotely caused by an excepted cause, where the fire spreads as the natural consequence of an excepted fire, the insurers are not liable. If, therefore , fire caused by civil commotion or, by any other excepted cause , spreads on account of natural causes to other premises, the loss caused thereby is not covered.

DISCLAIMER: the article presented is only for sharing information and knowledge with the readers. The views are personal and shall not be considered as professional advice. In case of necessity do consult with insurance professionals.