Electrical exclusion in fire insurance-a concept
Prem Chandra Shukla
Dear Friends,
I wish you a great 2013-14 leaving behind the bruise and agony of 2012-13. To kick off this FY in a right note I thought of sharing my views on ‘electrical exclusion’ in fire policy which is often misconceived. The contents of this article are my personal views on the subject. I welcome critical views from learned friends. Article is attached.
Regards,
P.C. Shukla| Surveyors & Loss Adjusters|Surveyors India
| 117/H-1/125| Pandu Nagar| Kanpur| Uttar Pradesh - 208005| INDIA
| Tel: +91-512-2216416 | Tel/Fax: +91-512-2231409| Mobile: +91 9415044156
chandra dasaraju
sanjay gupta
| Dear Shukla Ji, A Great work and good analysis. I May add some excerpts from my Book " Practial Aspects of Fire Insurance " Which shall carry the discussion forward for the benefit of all fire surveyors. Excerpts from My Book Named “ Practical Aspects of Fire Insurance “
Exclusion No: 7 of SFSP Policy “ Wording “ The Policy excludes Loss, destruction or damage to any electrical and / or electronic machine, apparatus, fixture or fitting (excluding fans and electrical wiring in dwellings) arising from or occasioned by over-running, excessive pressure, short circuiting, arcing, self-heating or leakage of electricity, from whatever cause (lightning included).
This Exclusion has been defined to exclude the loss or damage to any kind of electrical / electronic machinery / system which may get damaged on account of fire generated within itself or on account of excessive voltage / short circuit etc which may eventually lead to fire and for any lay person it may appear that the cause of loss is fire. However if state it differently “ the machine caught fire due to some kind of malfunction or voltage fluctuation or short circuit which led to fire “ The sequence of events as stated above make it clear that the proximate cause of loss for this machine is not “ Fire “ but some kind of mal function , voltage fluctuation or short circuit which are not insured perils under the SFSP Policy. Hence the claim is not covered and payable under the policy. Even though the claim is not covered as it has not been caused by an insured peril “ fire “ but the exclusion has been specifically designed for two purposes.
1. At the time of claim it may not be possible to identify if the fire occurred first or if the short circuit occurred first. To avoid this dispute the exclusion has been worded as above.
2. The most important is the second part of the exclusion which states that the exclusion is applicable only to one machine in which the fire originally started and not applicable to other machines. This portions clearly states that in case of such happening only one machine which is suspected to have caused the loss shall be excluded. All other machines are covered because the proximate cause of loss for them is fire and not the short circuit.
It may be pointed out that what ever is excluded as per exclusion above stands covered under MBD Insurance. Accordingly in case the insured is interested to get their electrical equipment covered against such exigency then they should opt for additional MBD Insurance.
Examples i) An insured X claimed that there was a blast in the Main Power Transformer of 5 MVA Capacity and the transformer caught fire. The estimate of repair is Rs. 15,00,000,00/- no other loss is reported. This loss stands excluded as per above exclusion because it is clear that there had been some kind of breakdown within the transformer which had caused blast. The fire was a sequel to this malfunction. Accordingly the proximate cause of loss in this case is not fire but breakdown which qualifies to be covered under MBD Insurance and not under SFSP Policy.
ii) In another case it was seen that in a finished goods Godown the fire started due to short circuit in one of the AC units installed. In the Godown and all other ACs fans and goods were also burnt. Under this claim the exclusion shall apply to one AC unit in which the fire had started but all other AC units are covered because for the first AC the proximate cause of loss is short circuit but for all other ACs the proximate cause of loss is fire which is an insured peril under SFSP Policy However the Policy specifically excludes “Loss, destruction or damage to any electrical machine, apparatus, fixture, or fitting arising from or occasioned by over-running, excessive pressure, short circuiting, arcing, self heating or leakage of electricity from whatever cause (lightning included) provided that this exclusion shall apply only to the particular electrical machine, apparatus, fixture or fitting so affected and not to other machines, apparatus, fixtures or fittings which may be destroyed or damaged by fire so set up.” This exclusion has been incorporated in the policy because the machine which caught fire on it’s own was damaged not because of fire but because some kind of breakdown or failure which resulted into fire. In this case the proximate cause of loss is not fire but failure or breakdown.
III, A Transformer, in running condition would catch fire due to failure of insulation of the windings or failure of dielectric of the transformer oil. This failure would cause flash due to short circuit and may or may not result in fire. Hence even if the fire had not occurred the transformer had been damaged due to breakdown, which is not an insured peril under the policy. Accordingly the claims of machinery in which the machine catches fire on it’s own while in running condition or even while it is plugged in are invariably denied under the above exclusion. Where ever the cause of loss / fire is attributed to Short circuit, which is very common cause, a suitable deduction in the claim amount has to be done under the above exclusion. In case the cause of short circuit is identified, eg one motor or one machine the same may be disallowed but the rest of the loss shall be payable. Similarly, the Loss to main power transformer of an insured was denied which was damaged due to flash in the transformer which had resulted into a fire.
IV This exclusion is also applicable to claims of electronic / electrical equipment which get damaged and the insured claims that the same were damaged due to lightening. It is a common fact that some machines get damaged during heavy rains / thunder / lightening even though there is no visible impact of lightening in and around the premises. The fact that these items get damaged is true but it is not necessarily because of lightening but it is because of leakage of current in the wires. The rains can cause short circuit in the supply wires or cause short of one of the phases with neutral due to which the current flows through the machines even if they are switched off (Between neutral and Earth connection) Accordingly in such cases the lightening can not be directly held responsible for the loss. Accordingly the above exclusion is very clear and has specifically included the words “Including lightening” while defining the exclusion. It may also be reiterated that the lightening dispenses huge amounts of energy which is sufficient to char even the mightiest of the buildings or structures. In the event of a lightening strike the loss would be universal and not only to computers and electronic equipment but would also involve burning and charring of the objects like wood paper etc. In the absence of any kind of signs of lightening strike all claims pertaining to electrical and electronic devices are likely to be rejected.
V, A Claim was reported for fire in the DG set under SFSP Policy. The complete Engine, Alternator and Acoustic Canopy were damaged / gutted in fire.
The Claim can be assessed considering that the DG set comprises of three independent entities . a Engine which is not an electrical machine and hence does not fall under exclusion VII of the SFSP Policy, alternator which is electrical machine and falls under exclusion VII of the policy Canopy is an inactive structure and hence does not fall under Exclusion VII of the SFSP Policy accordingly it can be considered that fire started due to short circuit in alternator and exclude alternator under exclusion VII and the rest of the loss to the engine and the canopy can be paid. Regards SANJAY GUPTA Surveyor and Loss Assessor SLA 51692 Exp 21-6-2015 H No: 2243 Sec 38-C, Chandigarh Ph: 0172-6538853 Tel / Fax 0172-2629651 Mobile : 9814006136 --- On Sun, 3/31/13, Prem Chandra Shukla <pcshuk...@gmail.com> wrote: |
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Shailesh Shah
Shailesh B. Shah
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