Fire Insurance, and the Meaning of Fire

In one line

A fire policy answers for damage by actual ignition that was accidental and that reached something which ought not to have been burning, and for nothing else.

In the wording a student can write in an exam: fire insurance is a contract of indemnity by which the insurer undertakes to make good the loss caused to the insured property by fire during the policy period, up to the sum insured; and for a loss to be a loss by fire three conditions must all be satisfied, namely that there was actual ignition, that the ignition was fortuitous or accidental so far as the assured is concerned, and that the thing damaged was something that ought not to have been on fire.

The statutory definition, and what it defines

Section 2(6A) of the Insurance Act, 1938, defines fire insurance business as the business of effecting contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies.

Two things follow, and both are examinable. First, it defines the business, so that the registration, solvency and returns provisions of the Act can attach to it; it does not define fire, and it does not tell a court what a fire policy covers. Second, its closing words, "or other occurrence customarily included among the risks insured against in fire insurance policies", are why a policy that also covers lightning, explosion, storm, riot and impact is still fire insurance business, and why the whole Standard Fire and Special Perils policy sits inside the definition.

What fire means in the contract is left to the courts, and they have settled it in the three conditions that follow.

The first condition: actual ignition

There must be fire, meaning combustion with flame or glow. Heat without ignition is not fire, however destructive; scorching, blistering, charring by heat, melting by heat and damage by smoke from a fire elsewhere are all outside the word unless the policy adds them.

Facts. Sugar was stored in a warehouse. A fire in an adjoining chimney flue caused excessive heat and smoke, and the sugar was damaged, but nothing in the warehouse itself ever ignited. Held. In Austin v. Drewe, (1815) 6 Taunt 436, the court held there was no loss by fire. There was no actual ignition of the goods insured; the fire had stayed where it was meant to be and only its heat and smoke had escaped. Why it matters here. It is the case for the first condition, and it draws the line every fire claim is argued on: fire, not heat.

The consequence is that damage by smoke, water and demolition is recoverable only because it is caused by an actual fire somewhere. Water poured by the fire brigade, goods thrown out of a burning building, a wall pulled down to stop the spread, all are losses proximately caused by the fire and are covered, provided there was a fire to begin with.