Property Insurance

Fire and related perils (material damage)

Introduction
Currently fire insurance accounts for a fairly high proportion of total non- life insurance premium income in Kenya. Many insurers treat fire as the main insurance business. Other classes of insurance are considered as “accommodation “business. The basic fire policy is called the standard fire policy because it covers same perils that is, fire, lightning, and limited explosion.

  • Fire

Fire is the actual ignition of something that should not be on fire, the cause being accidental or fortuitous. There are exclusions under this peril however.

  • Lightning

Any loss covered by lightning is covered under fire policy.

  • Explosion

Explosion cover is limited to explosion of boilers or gases used for domestic purposes,The use , however , will determine if the boiler or gas is domestic. In this regard a boiler located in the factory but used to boil water for making tea or washing hands is regarded as domestic.

Special perils under fire policy

The standard fire policy may be extended to cover other perils which are classified and described here below.

  • Social perils

These are perils with human source and they include strikes, riots, malicious damage and civil commotion.

  • Chemical perils

Chemical perils include explosions and spontaneous fermentation or heating. The latter peril should be under written with care because:

  • The property to be insured is usually prone to self jesting;
  • if property self-ignites it is very difficult to extinguish the fire
  • salvage prospects are low
  • very careful control of storage is essential; and
  • insurers will need to incur costs of survey before accepting the risk
  • Natural Perils

Natural perils include:

  • storm, that is atmospheric disturbances of unusual nature
  • flood, that is, escape of water from the normal confines of any natural or artificial water works;
  • earth quake;
  • subterranean or underground fire or fire of volcanic nature; and
  • subsidence, ground heave or land slip. Subsidence is uneven settlement of made up ground e.g. movement of foundations. Ground heave occur when ground that previously had low moisture is suddenly able to accept more moisture. A land slip is a min miniature land slide. It is a rapid movement down ward under the influence of gravity of a mass of rock or earth on a slope.

Miscellaneous perils
These are perils that cannot be classified under any of the above categories and are mainly escape of water, damage caused by any aerial device or articles dropped thereof and impact damage, especially to buildings caused by vehicles.

Long – term agreements under fire policies
This is where the insurer gives a premium discount in consideration of the insured offering to renew the contact for a given term, for example three or five years. The insured is under obligation to renew. Failure to do so will require that the insured pays back the enjoyed discount however, if the insurer changes the terms and conditions of the contract, the insured is not bound to renew.

Business Interruption Insurance
The policy is offered to protect future earnings of an enterprise after damage from an insured peril such as fire, including special perils. The fire and related perils policy ( material damage) covers buildings and contents or the capital items of a business. The material damage policy does not cover loss of profits occasioned by fire or any other peril insured. This is only covered under the business interruption policy. The perils covered under the business interruption policy are the same as those covered under the material damage policy.

The most common business interruption policies are those that cover losses from

  • Fire and special perils
  • Computer damage and breakdown
  • Engineering machinery breakdown

In a paraphrase, the purpose of business interruption insurance is to cover:

  • Net profit which would otherwise have been earned;
  • reimburse those standing charges or fixed expenses reduction in turn over or sales;
  • Meet such additional costs as are insured to enable the business to recover more quickly to reduce the loss, for example, lease of alternative premises.

Theft Insurance
Under the law:

“a person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it.”

The term burglary has been defined as follows:

“ A person is guilty of burglary if he enters any building or part of it as a trespasser. Having entered, he attempts to or steals anything in the building or inflicts on any person there in any grievous bodily harm.”

The burglary policy in insurance, however, will only cover loss or damage including entry into or entry from premise by forcible and violent means. This means that shop lifting, pilferage, entry by use of key or trick, or hiding in the premises are not covered. In other words, there must be physical evidence of force being used in entry or exit.

The burglary policy can be extended to cover “hold -up”, which is theft accompanied by assault or v violence or threat of it to be insured or employees of the insured.

“All Risks” Insurance
“ All risk” insurance is the widest cover available for property. The policy covers loss or damage to property from all perils other than the ones excluded. The term “all risks” is, therefore, a misnomer because the policy has some exclusions. Some of them are:

  • wear, tear, gradual deterioration, atmospheric condition, mildew, moth, vermin or insects;
  • mechanical or electrical breakdown or derangement, unless caused by accidental external means;
  • breakage of glass (other than lenses) or articles of brittle nature (other than jewelery) unless breakage is caused by fire or theft;
  • money and related items
  • theft of any insured property from the motor vehicles unless the property stolen is contained at the time of loss in a locked boot or locked locker forming an integral part of the vehicle; and
  • loss or damage due to or arising out of delay, confiscation, or detention by customs or other officials or authorities.
  • Generally , each item is specifically identified and is located a separate sum insured. For some items, such as jewelery and furs, insurers grant agreed value policies.

Money insurance
Basically a money insurance policy is an “all risk policy”. The money insurance policy covers:

  • loss of money raising out of any cause and
  • loss or damage to any safe or strong room specified in the schedule or any case in which money is being carried, the property of the insured or for which the insured is legally responsible, caused by theft or attempted theft.

Under the policy, money is defined as cash, bank and currency notes, cheques, postal orders, money orders and current postage and revenue stamps.

Goods – In – transit insurance
Goods in transit insurance is also an “all risk” policy. It covers loss, destruction or damage to the property insured caused by fire, theft and accidental means while in or on being loaded or unloaded from any road vehicle, train or temporarily housed in ordinary course of transit whether on or of the said conveyances. Cover may be restricted to loss, destruction or damage by fire or due to collision, overturning of the conveying vehicle only including loading or offloading damages. The type of policy issued depends on the need of the particular insured.

Glass Insurance
Plate glass insurance is basically also an “all risk” insurance. It provides cover against accidental breakage of fixed glass, windows, and doors and so on from any cause.

Contractors “All risks” insurance
Contractors “all risks” insurance cover provides cover in respect of both temporary and permanent works in the course of their construction. Cover also includes unfixed materials or equipment on site for incorporation in works, all the items of nonstructural plant, equipment tools and the like whether mechanically operated or not plus temporary buildings for use as site offices, mess accommodation workers’ camp stores, and workshops and their contents.

Engineering Insurance
The engineering insurance cover is intended to provide compensation to the insured in the event of an insured plant being damaged by an extraneous cause or through its own breakdown.

Under engineering insurance, the plant insured is grouped into six headings:

  • Boilers and pressure plants, examples include steam boilers, steam receivers, economists and other pressure vessels. These are covered under the boiler explosion policy.
  • Engine plants, the main ones are steam engine, gas and oil engines and other plants subject to mechanical breakdown.
  • Electrical plant, examples include electrical motors, generators, transformers and all kinds of electrical equipment either rotating plants or stationery plants.
  • Lifting machinery, examples of these are cranes of all types, tractors and passenger, goods and service lift. These items are insured under crane policy or lift policy.
  • Computers are covered under computer insurance policies.
  • Miscellaneous plant these are engineering plants that cannot fit in any of the above categories and include steam turbines and refrigerating plants.

 

Domestic Package Insurance
A domestic package policy provides the widest cover required in respect of private dwelling houses. It is issued to cover a private dwelling house and its contents, owners legal liability and domestic servants.

The policy has various sections – building, contents: “all risks”, workman’s compensation and liability – which which we now discuss

  • Building section

The domestic package policy defines a building as a private dwelling house or private flat including domestic out buildings landlord’s fixtures and fittings, wall gates and fences all in the same premises. The property is covered for hire and for special perils.

This section is extended to cover

  • Reasonable additional expenses for alternative accommodation and
  • Loss of rent payable to the insured if applicable

The amount payable is normally limited to 10% of the sum insured on buildings

  • Contents’ section

Contents consist of furniture, house hold goods and personal effects of every description, the property of the insured or any members of the insureds family normally residing with her or him; and fixtures and fittings, the insured own or one the insured is legally responsible not being land lords fixtures and fittings. The perils insured are the same as those insured under the building section. It covers the contents for fire and special perils including theft.

There are two important extensions under the contents’ section:

  • Goods temporary removed while visiting any private dwelling residence, hotel boarding house, nursing home or hospital or in a laundry and so on and
  • additional expenses of alternative accommodation and loss of rent.

The limit payable under extensions is normally 10 % of the total sum insured on contents.

  • “All Risks” section

Only specified portable items which can be carried outside the house are insured under this section. They include cameras, radios, jewelery and sports kits. The cover is very wide and includes accidental damage.

  • Workman’s compensation section

The work men’s compensation section covers domestic servants such as house help, watch men, shamba staff, and chauffeurs. The cover provided is in respect of injury, death or disease arising out of and in the course of domestic servants’ employment. The compensation provided here is not a requirement of the workman’s compensation Act.

  • Liability Section

The liability section covers third parties who sustain injuries or die while in the private dwelling house due to the owners or occupiers’ negligence. Most policies provide a limit of 250,000 Ks.