Fire-A Discussion

FIRE–A DISCUSSION

(June 2019)

 

image001[1] copy

 

INTRODUCTION

Any commercial or personal lines policy that covers property insures against direct loss caused by fire. While determining that fire caused a given loss may seem quite simple, many situations have arisen over the years that have forced the courts to determine exactly what can be considered a loss by fire. The answers to a few questions provide a reasonable yardstick to determine if a specific loss is a covered fire loss:

WHAT IS A DIRECT LOSS?

Black's Law Dictionary is the authority used for legal definitions of certain words that stem from relevant court cases so is used as a starting point:

A direct loss can be the result of an immediate cause of loss or a proximate cause of loss. The key is whether an intervening step alters the cause of the loss. Almost all losses could be described as resulting from a proximate cause because multiple steps often take place before the actual loss occurs.

 

Examples: The Fergusons’ house is on fire.

Scenario 1: John decides to fry a turkey. He follows the directions carefully except for the one about thawing out the turkey first. When he places the frozen turkey in the hot oil, flames burst forth and ignite the side of the house.

Scenario 2: Archer is chasing the dogs in the backyard while Doug is grilling hamburgers on the grill. Holly was tired of being chased and so made a sudden turn and ran into the grill which topples over sending burning coals against the side of the house.

Scenario 3: Josh decides to take a smoke break in the garage. He hears his mother calling and hides the cigarette before responding. The cigarette smolders and finally ignites the small bale of straw in the garage which then catches the garage on fire.

All of these scenarios result in the Ferguson house fire. All of them are based on multiple actions and decisions. However, the direct cause of loss in each case is a fire.

 

WHAT IS FIRE?

Fire as a term has many meanings. However, the old axiom "where there's smoke, there's fire" does not necessarily hold true when it comes to insurance.

Fire occurs when three elements are present: oxygen, fuel and ignition source. A fire starts when the three elements are brought together, and a flame or glow is produced. Smoke without a flame or glow is not considered a fire.

 

Examples:

Scenario 1: Millie washes and dries the grease-laden towels from her restaurant at the laundromat. As she removes each towel from the dryer, she folds it and places it in a laundry basket under the counter. She completes her task and walks next door. When she returns, the laundry is filled with smoke. There is no flame, but smoke is pouring from the towels that had spontaneously combusted. However, because no flame or glow was produced there was no fire.

Scenario 2: Trinkets, Inc.'s manufacturing plant catches fire and is soon totally engulfed. The nearby storage buildings all incur some smoke damage, but the fire does not damage them, thanks to the efforts of the fire department. The manufacturing plant loss is considered fire damage. The storage buildings’ smoke damage is also considered fire damage because fire was the proximate cause of the smoke.

Scenario 3:  Mary Electronics is a large electronics warehouse. One of its office computers overheats and begins to smoke. There is no flame but black smoke billows from the computer. The smoke spreads throughout the warehouse and it is later determined that the smoke damaged all of the computers. This is not considered a fire loss because no flame was present.

HOSTILE FIRE VERSUS FRIENDLY FIRE

Property insurance coverage forms and policies apply to only loss or damage from a fortuitous loss. Fire damage is therefore not always covered. If the fire loss is fortuitous there is coverage but if it is not, there is no coverage. Therefore, fire is described as either hostile or friendly. Loss from a hostile fire is covered while loss from a friendly fire is not.

Black's Law Dictionary makes this distinction:

A claim for fire loss has merit only if damage has resulted from a hostile fire. The courts have consistently agreed with the distinction insurance companies make between hostile and friendly fires, with only a few recent exceptions. Citing the exceptions would only confuse the otherwise almost unanimous agreement of the courts on this subject.

There is broad general agreement that a fire in a trash barrel or incinerator is a friendly fire and that the inadvertent burning in such a container of something of value is not covered as a fire loss.

 

Examples:

Scenario 1: John purchases a gold necklace for his wife, Julie, to celebrate their first anniversary. He hides it under the logs in the fireplace because he wants it to be a complete surprise. Julie is also excited about their anniversary and decides to start a fire before John gets home. John and Julie's homeowners policy does not cover the loss to the gold necklace because the fire occurred within the friendly confines of the fireplace.

Scenario 2: We’ll change the example above and have John present the necklace to his wife while they are sitting in front of the fireplace. Julie is very excited and inadvertently kicks the fire screen, resulting in it flying into the fireplace and causing embers to cascade throughout the living room. The small fires the flying embers cause are hostile and covered losses under the homeowners policy because they escaped from the friendly confines of the fireplace.

CONCLUSION

A direct fire loss is where a hostile fire is the proximate cause of loss. The loss must be caused by or result from a fire, such as a building burning, or be the result of an unbroken chain of events, with fire as the primary cause of the events.