Lecture IV. Conditions in Fire Policies

Extract

The law of fire insurance depends on the two fundamental principles, that a fire policy is a contract of indemnity, and that, in its usual form, it is a personal contract. In the present lecture I propose only to deal with the conditions in fire policies which express or modify these principles.

The first principle, that fire insurance is a contract of indemnity, is founded on considerations of public policy, and is a rule of law which cannot be set aside by consent of parties. An insurance against loss by fire for a fixed sum, irrespective of the actual loss sustained by the insured, would not be valid or enforceable.

Policies of marine insurance, which, like fire insurance, is a contract of indemnity, are sometimes made valued policies, but this does not mean that the policy will be sustained if it is proved that the value stated in the policy exceeds the actual value of the subject insured. The object of the valuation is to supersede the necessity of inquiry into the value of the vessel and cargo after they have been lost, but if it is proved that there has been a fraudulent over-valuation on the part of the insured, or an illegal agreement between the insurer and insured to effect an insurance without interest, the policy will not be sustained for the actual value, but will be treated as altogether void. A valued policy is therefore good for its amount or for nothing.