After a business establishment has been partially or totally razed by fire, this is the first question usually asked: “Is it insured?” If it is, the normal impression is that the owner will eventually be able to resume his business from the proceeds of his fire insurance policy. However, this is not often true in many cases. The problem of under-insurance crops up if the sum insured is less than the market value. As a consequence, the owner winds up with a claims settlement less than expected. This has caused a lot of misunderstanding as the owner may not have been informed of the AVERAGE CLAUSE of the policy, which reads as follows:
“If the property hereby insured shall at the breaking out of any fire, be collectively of greater value than the sum insured thereon, then the insured shall be considered as being his own insurer for the difference, and shall bear a ratable proportion of the loss accordingly. Every item, if more than one, of the Policy shall be separately subject to this condition.”
To illustrate, if a property is valued at P1 million based on an appraisal report but the owner insured it for P500,000 pesos, in the event of a loss, his claim would be settled at a sum of P250,000 by virtue of the AVERAGE CLAUSE (Condition No. 20 of a standard Fire Insurance Policy). Thus the owner-insured would be greatly disappointed as he was unaware of this Clause if his Agent or Broker failed to inform him. It is therefore recommendable for the owners to have their properties appraised as to their market values.
In the observance of the Fire Prevention Month last March, the Bureau of Fire Protection (BFP), which is the country’s primary agency responsible for fire safety, prevention and suppression, is the most undermanned and underequipped agency in the country. To remedy this sad situation, Senator Ronald dela Rosa sponsored Senate Bill 1832 co-sponsored by Sen. Christopher Lawrence Go, which was unanimously passed by the Senate. This Bill mandates the BFP to implement a modernization program that will be geared towards the capability enhancement of its personnel, as well as the acquisition of the necessary fire prevention and suppression, fire investigation, emergency medical and rescue service facilities and equipment.
The BSP reported 8,897 fire incidents in 2019 causing 260 fire-related deaths and 892 fire-related injuries in the country, with the National Capital Region (NCR) accounting for the highest number of incidents, deaths and injured persons.
For the five-year period (2013-2017), assets lost to fire amounted to P22.9 billion or an average of P4.6 million per year. Again, the NCR registered the biggest amount of lost assets.
As of June 2020, all 146 cities nationwide already have fire stations while of the 1,488 total municipalities, only 1,193 or 80.2 percent do not have fire stations yet. Also, the BFP reported that a total of 229 municipalities do not have fire trucks.
With the approval of Senate Bill 1832, the BFP can now proceed to implement the modernization program. It is also noted that aside from their duties as firefighters, they perform key roles in rescue and retrieval operations in times of calamities and unforeseen disasters.
The author is a risk management consultant and Editor of Insurance Philippines magazine.