CHAPTER XIV

POLICY ENDOREMENT IN FIRE INSURANCE

Standard Policy Not Adapted to Meet All Kinds of Circumstances.-The standard fire policy was necessarily prepared with reference to a general situation. Yet many property owners are confronted by special circumstances that make a modification of, or addition to, existing policy provisions highly desirable, or that require the incorporation of new agreements not suggested in the printed portion of the policy. In fact, the policy recognizes the necessity for special arrangements since it provides that "any other agreement not inconsistent with or a waiver of any of the conditions or provisions of this policy may be provided for by agreement in writing added hereto." Such agreements take the form of printed or written endorsements on the policy, sometimes called "forms," "clauses," or "riders." When attached to the policy such endorsements take precedence over any provisions in the contract with which they may be in conflict. Being of an even or later date than the policy, they are assumed to represent the latest meeting of the minds, and thus constitute the last agreement of the parties to the contract.

In previous chapters extended reference was made to a considerable number of very important clauses, such as the mortgagee, loss payable, other insurance permitted, coinsurance, distribution, pro rata, three-fourths value, three-fourths loss, two-thirds vacancy, and reinsurance clauses. But there are hundreds of other endorsements

in use, designed to meet almost every special situation that may confront the applicant for insurance. A knowledge of these clauses and their application to meet special situations should be the object of every broker and agent who wishes to serve his client well. It is through their use that property owners may secure the most adequate protection at the lowest possible cost. With comparatively few exceptions the numerous endorsements may, roughly speaking, be divided into the following classes: Forms or Clauses Descriptive of the Property or Interest Insured.-Previous chapters contained, an explanation of the two sections of the standard policy relating to (1) the description of the property, and (2) the character of the ownership or interest of the insured. In both respects numerous situations arise for special treatment through endorsements. The forms and clauses referred to may be classified into those:

Describing the property.-The standard policy covers "the following described property while located and contained as described herein,

.... but not else

where, to wit." Following these words a large blank space is provided for the description of the property or interest. But owing to the thousands of agents writing policies, it is highly inadvisable to give full freedom in drafting the description called for. To do so would mean an enormous increase in the number of non-concurrent policies, especially in view of the numerous instances where many policies cover the same property and where the property consists of several or many distinct items. In many cases, the description must necessarily be elaborate, and there is danger of the agent making the same inaccurate or incomplete. Experience has also demonstrated the advisability of making the policy, wherever possible, specific as regards the amount of insurance on each of the various items covered. To meet

all of these considerations hundreds of "building" and "contents forms" have been drafted in the form of printed riders that contain an extended and careful description of each class of property together with the specific amount of insurance attached thereto. Among the leading forms may be mentioned the "dwelling form," "household and furniture form," "private garage and contents form," "dwelling, household, furniture, stable, and contents form," "standard farm form" (often containing as many as twenty-five different items to each of which a specific amount of insurance is made to attach), "church building and contents form" (other forms relate to schools, libraries, and other public buildings), "mercantile building and fixture form," "merchandise and fixture form," "mercantile, building, fixtures and stock form," "country store form," "manufacturing building form,' "machinery and stock form," and "manufacturing special hazards form." Numerous other forms relate to the buildings, stock or equipment of specialized businesses, such as jewelers, photographers, grain elevators, cold storage plants, coal mining properties, lumber yards, power plants, street railway companies, oil plants, moving picture theaters, etc.

Describing the insured's interest.-Ownership may not be sole and unconditional, and insurable interest, as we have seen, may assume a great variety of forms. Hence, numerous clauses are used to protect the insured adequately by defining his title or interest. Thus the insurance may be made payable "as interest may appear, "as now or may be hereafter constituted," or "for whom it may concern." Other endorsements serve to describe the insured interest in estates, or to continue the policy in force, in the event of the death of the insured, "for the benefit of the heirs, administrators, or assigns as interest may appear."

Permitting changes in the location of the property.— Location of the insured's property, as already explained, is a vital consideration in fire insurance, and the policy covers only with respect to the location described. Circumstances, however, may make a more flexible treatment desirable. Accordingly, it may be agreed by endorsement that the property may be moved to another location, or that it will be covered while contained in one of a number of locations, such as "in or on buildings, additions and extensions." Many types of property must necessarily move from one location to another. To meet such situations insurance companies issue "floating," "tourist," and "excess floater" forms. The last form is designed to protect property in different locations to the extent that any specific insurance applying to any particular locality may prove insufficient.

Allowing an adjustment in the insurance coverage.Reference is had to such clauses as permit a change in the items covered, by either omitting some or adding others; register a partial cancellation; reinstate the policy for its original amount in the event of a partial loss payment; or record the fact on the mortgagor's policy that the mortgage claim has been satisfied.

Extending the insurance coverage. The standard policy limits the company's liability to "direct loss and damage by fire," and in this connection distinctly states that there shall be no liability "for loss resulting from interruption of business or manufacture." Yet owners may find it desirable, or even imperative to be protected against (1) the loss of profits resulting from inability to operate a factory or other business owing to a fire; (2) the loss of rent because a fire has rendered the building uninhabitable; and (3) the loss of commissions and profits on stocks of goods owing to their destruction by fire. By special endorsement the insured may be pro

tected against any of these contingencies. These additional types of coverage-commonly known as "use and occupancy," "rent" and "profit" insurance-have assumed such large proportions in recent years that they will be made the subject of a separate chapter.

Without a special agreement to the contrary, fire policies do not cover water damage occasioned by automatic sprinklers when their action is not attributable to fire. This hazard is ever present in any sprinklered risk, and accordingly, companies are willing to grant by agreement so-called "sprinkler leakage insurance." Again, the "guest or servant clause" extends the insurance to the belongings of any member of the family or servants.

Endorsements Limiting or Distributing the Indemnity. -Justice between different property owners requires that fire insurance be written subject to coinsurance, and practically all policies covering mercantile and manufacturing risks are, therefore, endorsed with 80 per cent, 90 per cent or 100 per cent coinsurance clauses. In other instances, it is desirable to control the moral hazard, or to induce the insured through self-interest to safeguard his property by the exercise of every possible precaution. To thus increase the owner's incentive, a three-fourths value or three-fourths loss clause may be applied to the insurance. In still other instances, where the property is situated in different localities, so-called "distribution" or "pro rata" clauses are used. Again, where the property consists of distinct items, special forms are attached separating the insurance with a view to allocating a specific amount of indemnity to each item.

Endorsements Decreasing the Hazard.-Certain risks are not desired by the insurer at all, or, if assumed, the acceptance is often based upon the existence or observance of definite conditions. The leading clauses decreasing the hazard are: