Development of a standard fire form

State variations

The New York standard fire policy—general arrangement

Page one—insuring clause

Enforcement of assignment clause

Where assignment may be valid

Change in corporate ownership may eliminate coverage

Page 2—New York standard fire policy

Acts of the insured that void the policy

Uninsurable and excepted property

Perils not covered

Neglect in preserving property

Other insurance

Conditions suspending coverage

Increased hazard

No increased hazard—cases

Vacancy

Explosion and riot

Added Provisions and waiver

Cancellation

Mortgage interests

Pro rata liability

Loss procedure

Appraisal

Function of appraisers and umpires

Other provisions

Development of a Standard Fire Form

While there is nothing uncommon about the concept of standard insurance policies today, it should be noted that the use of such forms did not begin until late in the nineteenth century. Massachusetts was the first state to adopt a standard form for writing fire insurance in 1873.

 The insurance business in the early days was characterized by contracts issued on almost a neighbor-to-neighbor basis. The importance lay not in the language of the agreement but in the mutual knowledge insurer and insured had of each other’s business and the common understanding they were able to achieve of how (and what) risks of one would be transferred to the other.

 The need for a standard contract began to make itself felt only as the expansion of communication and travel techniques brought the business out of its provincial period. The importance of the contract grew in direct proportion to the change in the relationship between the underwriter and the insured. As they were no longer neighbor dealing with neighbor, but total strangers, the language expressing their mutual agreement became their principal bond. That this language should mean the same to each—at least to the extent that such is possible—became a paramount consideration.

 Thirteen years after a standard form was established in Massachusetts, the New York legislature adopted a standard policy and it, with statutory variations, came to be used in more states than any other.

 In 1916, the National Convention (now Association) of Insurance Commissioners recommended a new standard form for general adoption. It became mandatory in New York in 1918. It was used there until superseded by the present policy in 1943.

 The 1943 New York standard fire policy, or statutory contracts differing from it only slightly, is now in use in nearly all states. Over the years, the 1943 New York policy—now often called simply the standard fire policy—has replaced the earlier versions of the form. With the development of package policies, and especially those with simplified policy language, the standard fire policy is no longer required on packages—as long as their provisions are at least as broad as those in the standard form.

 State Variations

 Many states that employ the New York 1943 standard fire policy have adopted minor statutory variations such as changes concerning term time, commencement of suit, approval or use of simplified forms, or cancellation provisions. The following chart identifies which states use the 1943 New York standard fire policy. Other states simply list the policy in their statutes, and the form may contain differences from the New York standard form.

 The New York Standard Fire Policy—General Arrangement

 Page 1 of the New York standard fire policy contains the insuring clause, the amount of premium to be paid, and an identification of the insurance company and insured. The date on which the policy becomes effective and the date of its expiration are also set out on this page. There is also space for the agent’s countersignature. Often, a declarations page is combined with the first page of the standard fire policy also—showing rates and amounts of insurance, a description of the covered property, and the name of the mortgagee, if any.

 Page 2 has 165 lines arranged in two columns. This page sets out the policy conditions, property that is not covered, the excluded perils, and provisions relating to waiver, cancellation, mortgagees, other insurance, appraisal, loss payment, suit and subrogation.

 Page 3 is optional and in blank. Forms and endorsements are attached here.

 Page 1—Insuring Clause

1.Covers the insured and legal representatives to the extent of actual cash value of property at the time of loss or damage. (See Actual Cash Value).

 The insured’s recovery is not to be more than the cost to repair or replace the property within a reasonable time and no consideration is to be given to any increased cost the insured may experience if local ordinances require replacement of the property with more expensive construction or materials. However, such exposures are insurable. There is no coverage for loss brought on by interruption of business or manufacturing processes—though specific forms covering time element exposures may be added to the fire policy.

 2.Covers all direct loss or damage by fire, lightning, and removal from premises endangered by perils insured against by the policy. The coverage for removal is generally considered as being for all risks of physical loss. For example, if insured property is removed from a building because it is threatened by fire and the removal takes place in the middle of a cloudburst, damage caused by the rain is covered.

3.Limits recovery to the interest of Insured.

 4.Recites term of insurance and sets hour of commencement and expiration as noon, “standard time at location of property involved.” In some jurisdictions, policies beginning and ending at 12:01 A.M. standard time have been approved. In these jurisdictions, an “overlapping coverage” provision has been included under the Policy Term item. This provision applies when a policy being replaced has a “noon” expiration. The new policy then picks up at noon also.

 5.Covers pro rata for five days at each proper place to which property shall be removed for preservation from “perils insured against in this policy.”

 6.Provides that assignment shall not be valid except with written consent of company.

 Enforcement of Assignment Clause

 The assignment clause is generally enforced, as illustrated by the following court cases. Nonetheless, courts have carved out exceptions to the general rule which are reviewed in the following section of this article. Note that assignments of insurance proceeds after a loss may generally be carried out without the consent of the insurer since the insurer’s position is in no way harmed by such assignments. So, the cases that follow involve assignments made without the insurer’s consent and before the loss occurred.

 An example of the enforcement of this provision is found in Smith v. R.B. Jones of St. Louis, Inc., 672 S.W.2d 185, decided by a Missouri appeals court. In this case, coverage for a fire loss was denied by the insurer (the Missouri FAIR plan) due to failure on the part of the buyer and seller of the building to obtain the insurer’s consent to the assignment of the policy, although a representative of the insurance agent for the seller had agreed to “take care” of the assignment. In the lawsuit, the buyer argued that coverage should be granted because he was justified in relying upon the agency representative’s statement. The court held such reliance unfounded. “He [the buyer] had possession of the insurance policy and the opportunity to read it before, during, and after completing the standard assignment form and could have easily determined the policy was unassignable merely by reading the first page of the policy.” The court also noted that the buyer was a licensed insurance agent who was capable of understanding the assignment clause.

 In Republic Ins. Co. v. Chapman, 247 S.E.2d 156 (1978), a Georgia court of appeals also ruled against the insureds, a husband and wife who had separated. The husband was the only named insured on the policy, although the wife was also an insured. The husband, as part of their property settlement, conveyed his interest in the property to his wife by warranty deed. On the same day as the conveyance, the property was destroyed by fire. The court held for the insurance company, reasoning that insurance contracts are personal in nature and the insurer has the right to select insureds based on “the character, integrity, and personal characteristics of those whom they will insure.” Since the only named insured was the husband, and since only he had the right to bring a court action for recovery under the policy, the wife was not entitled to the insurance proceeds.

 Another case in which failure to properly assign the policy resulted in failure to collect insurance is Christ Gospel Temple v. Liberty Mutual Insurance Co., 417 A.2d 660 (1979). Upon the merger of two churches, the church building owned by one of the two merged groups was sold, and the fire policy on the sold building was assigned to another congregation. No report of the assignment was made by the seller-insured church to the insurance company, although an agent of the insurer visited the property shortly after the sale was completed and reported the change in ownership to the company. Ten days later, the church was extensively damaged by fire. Due to lack of consent to the policy assignment, the insurer denied coverage.

 A Pennsylvania appellate court resolved the question of whether insurance coverage had been validly assigned to the building’s new owner. The court ruled that it had not. “The provision [requiring insurer approval of assignment] is not simply a self-protective clause inserted at the whim of the [insurance company], but rather is a legislatively mandated provision, specifically required to be included in fire insurance policies. . .” The court turned aside the new owner’s contention that the insurer was prevented from challenging assignment of the policy because its agent knew about the sale of the property and had reported the new ownership before the loss occurred.  “It is well settled that a fire insurance policy is a personal contract of indemnity, and is on the insured’s interest in the property, not on the property itself,” the court stated.

 A 1988 court decision upholding the enforceability of the non-assignment clause is Carle Place Plaza Corp. v. Excelsior Insurance Co., 534 N.Y.S.2d 397. Without much discussion of the particular facts involved, a New York appellate court wrote, “. . .the unauthorized assignment. . .to a third party upon conveyance of the property rendered the policy null and void. When the property was ultimately conveyed and the policy purportedly assigned. . .the [assignee] received nothing more than a dead instrument.”

 Where Assignment May Be Valid

 Several exceptions to the general rule of the enforceability of the assignment clause have been developed by case law. The basis for the enforceability of the assignment clause is the reasoning that the insurer should be able to veto insuring persons or entities that represent an increase in risk over the original insured. The exceptions to the general rule are based on the idea that insurance should be payable where the assignment has not increased the insurer’s risk.

 A case that reviews the exceptions to the general rule is National American Ins. Co. v. Jamison Agency, Inc.,; 1974 C. 501 F.2d 1125 (1974). The insured purchased a three-year fire policy on its plant. During the first year of coverage, the company was purchased by another firm. The buyer retained the selling company’s name so that the “named insured” remained the same. (Because the former owner [an individual] was no longer involved, the policy was endorsed to delete that individual’s name.)

 Sometime within the first year, the company that was the original named insured was dissolved and all of its assets, including the fire policy, were transferred to the buyer. In reality, nothing was changed at that time from the standpoint of ownership, because the buyer’s interest in the property was the same after the dissolution of the original named insured as it was before. But the policy was not endorsed to reflect the new operating name.

 Later, when a fire destroyed a large portion of the insured property, a claim was submitted to the insurance company. The insurer denied coverage on the grounds that an assignment of the policy was made without its knowledge or approval. A lawsuit followed.

 Though the trial court had concluded that the assignment was in violation of the policy, the federal appeals court did not agree and reversed the original decision. The court said that the object of this policy provision is to prevent an increase of risk and hazard which may result from a change of ownership without the insurer’s knowledge. But, in this case, there was no such increase in hazard because the new firm had as much interest in the insured property before the dissolution and assignment as after it.

 In supporting its position, the appeals court reviewed other situations in which failure to receive the insurer’s consent to an assignment will not invalidate the transfer. Exceptions are made when: (1) one partner in a business assigns his insurance interest on the business to other partners, or (2) when property and the policy are transferred by operation of law (e.g., when a bankrupt transfers property to a bankruptcy trustee or heirs inherit property by probate decree). The court argued that the “exception for transfers by operation of law points once again to the fact that courts will not slavishly follow the rule against assignments without consent when the reason for that rule does not exist in the particular situation.” This case was referred to as support for a similar conclusion in the case of Imperial Enterprises, Inc. v. Fireman’s Fund Ins. (1976), decided by a federal appeals court applying Georgia law.

 A case holding that transfers between partners without consent from the insurer would not void coverage is Strahorn v. Kansas City Fire & Marine Ins. Co., 42 N.W.2d 903 (1950). In Strahorn (involving collision coverage on a car owned by a car dealership), the Supreme Court of Iowa quoted from an earlier Ohio Supreme Court decision: “The presumption is, that the company had faith in all the partners; the increase of plaintiff’s interest, as we have seen, would not make them more watchful; the retiring partner no longer had a motive to injure the insurer; no stranger was introduced; no one but those with whom the contract was made was left in control.” The Ohio case is West v. Citizen’s Ins. Co., 27 Ohio St. 1 (1872). The court also took this quote from 45 C.J.S., Insurance, sec. 427: “A sale by one partner to another of his interest in the property, accompanied by a delivery of the policy, operates as a valid assignment without the consent of the insurer and transfers to the purchaser all the seller’s equitable interest, and such assignment does not fall within the clause requiring the insurer’s consent.” In addition to these authorities, the court pointed out that Iowa had promulgated a statute providing that recovery under a policy would not be prevented if failure to observe a policy stipulation did not contribute to the loss.

 A case involving bankruptcy is Gulf Ins. Co., Dallas, Texas v. Thieman, 356 P.2d 360 (1960), decided by the Oklahoma Supreme Court. The case involved a home owned by a married couple; the owners filed a voluntary bankruptcy action during the policy term. A month after the bankruptcy petition was filed, the insureds were declared bankrupt and a bankruptcy trustee was appointed to take charge of the insureds’ property. The property was totally destroyed by fire a few months after the trustee was appointed. The trustee instituted legal proceedings to recover on the fire insurance policy, alleging that he had become vested, by operation of law, with title and interest in the dwelling. The insurer denied coverage based on the nonassignment provision.

 The trial court held that because the transfer of interest had been by operation of law, it was not an assignment within the contemplation of the insurance policy. Also, the trial court asserted that the transfer to the trustee did not increase the moral hazard.

 The appeals court, agreeing with the trial court, pointed out that the insurer quoted an earlier version of the New York Standard form as if it were currently in use. The 1918 New York Standard form had contained the following language: “Entire policy is void. . .(d) if any change, other than by death of insured, takes place in interest, title, or possession of property, except change of occupants without increase of hazard.” The court found the change to the current assignment provision significant. It stated that the issue was not whether there had been a change in interest, title, or possession, but whether there had been an assignment within the meaning of the policy.

 Concluding that the transfer to the bankruptcy trustee was not an assignment within the meaning of the insurance policy, the court said that “. . . an insurance contract, like other contracts, must be presumed to be entered into with the knowledge that, if bankruptcy occurs, the rights of the contracting parties will be subject to the special laws that govern that situation.”

 A California court of appeals also held for the insured in University of Judaism v. Transamerica Insurance Co., 132 Cal. Rptr. 907. In this case, property owners transferred their title to the property to a university, and assigned the fire policy on the premises to the school a few days later. Subsequently, a fire damaged the property and the insurer denied coverage due to lack of written consent to the assignment. The court held, “. . .had notice been promptly given prior to the loss, defendants would have routinely approved the assignment of the policy. There was no change in the nature of the activity carried on at the premises. There is no evidence that the change of ownership in any way increased the risk to [the insurance company]. Since the change in ownership did not increase the risk to [the insurance company], and they would have routinely approved the assignment, they cannot claim they suffered any prejudice from the late notice.” Moving from a discussion of the particular facts of the case before it to a more general view, the court said: “To avoid a forfeiture, [the party seeking insurance] may, in lieu of express approval, show that the assignment would have been routinely approved.” A federal trial court in Puerto Rico applied the same logic and referred to the University of Judaism case in In Re San Juan Dupont Plaza Hotel Fire Litigation, 789 F. Supp. 1212 (1992).

 Change in Corporate Ownership May Eliminate Coverage

 Courts that do not always uphold the nonassignment clause seem to assume that a change in corporate ownership, without a name change, has no effect on coverage (see the Jamison case discussed above). The following case takes a different view. In Porat v. Hanover Ins. Co., 583 F.Supp. 35 (1983), a federal trial court ruled for the insurer when a closely held corporation did not change its name, but all ownership interests were transferred to a third party. The insured purchased a burglary policy in his name and the name of his business (a gift shop) from Hanover insurance; the policy contained a non-assignment provision. He later bought another burglary policy in the name of the business from the Federal Emergency Management Agency (FEMA). The FEMA policy included the following provision: “This policy cannot be transferred or assigned. Coverage ceases at the time of a move to a new premises or at the time of any change in ownership.”

 When the policies were issued, all stock in the corporation was held by Porat and his partner. During the policy terms, all of the stock was transferred to another party. The store’s merchandise was stolen a few months later, and the insurers denied coverage.

 Porat argued that the policies had never been assigned, so coverage did not cease. He pointed out that the corporation remained the insured even after the sale. Regarding the Hanover policy, the court found that the designation of the insured as “Mark Porat t/a MBM Electronics and Gifts, Inc.” meant that the actual insured was the individual, not the corporation. Thus, agreement for assignment of the policy to the new owner was necessary for coverage to continue.

 Under the FEMA  policy, the corporation remained the named insured but coverage ceased, according to the policy terms, when the change in ownership took place. Furthermore, FEMA’s regulations had the same provision concerning cessation of coverage upon change in ownership.

 Page 2— New York Standard Fire Policy

 Page two of the policy includes provisions regarding acts of insured that void the policy (lines 1 to 6), uninsurable and excepted property (lines 7 to 9), and perils not included (lines 11 to 17).

 Acts of Insured That Void the Policy

 By specific provision, the entire policy is void in case of willful concealment or misrepresentation of material fact or circumstance, fraud, or false swearing (lines 1 to 6). See Effect of Insureds’ Declarations or Statements.

 Uninsurable and Excepted Property

 By specific provision, the standard fire policy does not cover accounts, bills, currency, deeds, evidences of debt, money, notes, or securities. (Lines 7-9.)

The form also does not cover bullion or manuscripts, but coverage may be included if these are specifically named in writing. (Lines 9-10.)

 Perils Not Covered

 Coverage for certain perils is specifically excluded. This section excludes loss by fire and the other perils covered by the policy if caused, directly or indirectly, by: (1) enemy attack by armed forces; (2) action taken by military, naval, or air forces in resisting an actual or immediately impending enemy attack; (3) invasion; (4) insurrection; (5) rebellion; (6) revolution; (7) civil war; and (8) usurped power. (Lines 11-17.)

 The exclusion of loss caused by “insurrection” did not affect recovery for riot damage experienced in a number of American cities in the latter half of the 1960s. Mob action, unless specifically aimed at the overthrow of existing government, is not insurrection. For a detailed discussion of the “war exclusion,” see The War Exclusion Clause.

 The “Perils not Covered” section also excludes loss caused by order of civil authority, except destruction of property to prevent spread of a fire not originating from an excluded hazard. (Lines 18-21.)

 Fire policies were once silent on the subject of destruction by civil authority, although a Civil Authority clause could be added by endorsement. However, that endorsement resulted in broader coverage than is contained in the present language. In a leading case, Princess Garment Co. v. Fireman’s Fund Ins. Co., 115 F.2d 380 (1940), the endorsement was held to cover flood damage to the insured’s goods, after police and firemen ordered the insured’s employees out of the building before they could remove the property away from a rising flood. There was a serious fire nearby and it was feared it might be necessary to dynamite the building to check the progress of the fire, although dynamite was not actually used. It is doubtful that the same outcome would have resulted if the current policy had then been in force. Coverage currently is limited to actual acts of destruction by civil authority.

 Neglect in Preserving Property

 The form excludes loss by theft, and loss caused by neglect of the insured “at and after a loss” to protect and preserve the property by using “all reasonable means.” (Lines 21-24.)

It is in the area of arson by an insured that this clause becomes a legal issue. The question posed is: does this provision apply to deny recovery for fire loss to one named insured (i.e.,  the innocent spouse) when another named insured intentionally destroys insured property?

The original rule was that the obligation imposed on insureds under this clause was joint, and if one insured breached the duty, the policy was voided as to all insureds. Eventually, this rule was modified by the majority of courts so that innocent coinsureds were allowed to recover their portion of the proceeds. That view seems to be changing once again as courts analyze changes in policy language relating to concealment, fraud, or misrepresentation by any insured.

 Other Insurance

 The policy authorizes prohibiting other insurance or restricting the amount of insurance by endorsement. By implication, therefore, other insurance is permitted, unless prohibited or restricted by contract, or unless the property is of a class on which the rules require a limitation of insurance.  (Lines 25-27.)

 Conditions Suspending Coverage

 There are three situations where coverage can be suspended under the standard fire policy: (a) if hazard is increased by any means within control or knowledge of insured (lines 31, 32); (b) if building is vacant or unoccupied for more than sixty consecutive days (lines 33 to 35); and (c) loss from explosion or riot (lines 36, 37).

 Note the difference between a void policy and a suspension of coverage. Where a policy is voided, such as under the misrepresentation or fraud clause, the policy is deemed not to be in existence; it is nullified in the entirety. Where coverage is suspended, the policy remains effective, but is not in effect so long as the situation leading to the suspension of coverage exists.

 Increased Hazard

 The standard fire policy states that the insurer will not be liable for loss occurring “while the hazard is increased by any means within the control or knowledge of the insured.” Due to the use of the phrasing “while the hazard is increased,” this is a temporary suspension of coverage, and not a voidance of the policy.  Further, the argument may be made that the coverage is only affected for the hazard(s) which are increased. For example, storing dynamite on premises insured as a lumber warehouse would suspend coverage for fire loss, but may not necessarily suspend coverage for the peril of theft.

 Following are some examples of cases where the court agreed with the insurer that the hazard was increased within the knowledge and control of the insured, such that coverage was suspended.

 In Wilson v. Concordia Farmers Mutual Insurance Co., 479 S.W.2d 159 (1972), a Missouri court of appeals affirmed a jury’s verdict that the insured had caused his dwelling policy to be void on account of increase of hazard within both his knowledge and his control. A fire—actually five separate fires—occurred the same night the insured moved his personal belongings to another dwelling. Fire investigators testified that each fire showed evidence of the intense heat given off by flammable liquids and that in each fire area they found containers for turpentine, paint and varnish thinner, charcoal lighter fluid, etc.

 The Maryland court of special appeals held, in Weinberg Realty Company, Inc. v. The Hartford Mutual Insurance Co., 413 A.2d 1368 (1980), that vacancy of an insured building for a period of forty days before it was substantially damaged by fire represented an increase of hazard within the control of the insured, even though the standard vacancy condition of the policy (see below) had been eliminated by endorsement. The building in question was in a deteriorated condition at the time of the fire, it had been cited in 54 outstanding housing code violations, and it had been damaged twice by fire during a month-long period of vacancy two years earlier. The Maryland court posed the question “whether a vacancy which would not otherwise trigger a suspension or restriction of coverage may … nevertheless have that effect” when the vacancy itself involves a failure to take precautions such as securing the premises against trespassers. The court answered its question in the affirmative and denied recovery to the insured.

 The insured’s beginning operations of a different, and more hazardous nature, can cause this provision to be invoked to deny coverage. An example is Continental Western Fire Insurance Co. vs. Poly Industries, 349 N.W.2d 606 (Minn., 1984). In this case, a manufacturer of soaps and detergents (which required the use and storage of flammable solutions) began experimenting with an agricultural crop oil that required the use of ethylene oxide (an extremely flammable, dangerously reactive liquid). An explosion and fire resulted from the release of ethylene oxide vapors. The court ruled that the insured knew or should have known of the increased hazard to the premises from the introduction of ethylene oxide and upheld a denial of coverage.

 The maintenance of an illegal still operation concealed in a closet was held to suspend coverage for a fire loss in Good v. Continental Insurance Co., 291 S.E.2d 198 (So.Car., 1982).

 No Increase in Hazard—Cases

 Following are examples of cases wherein the courts have looked at the standard fire policy’s (or other policies based upon the statutory requirements of that form) increase of hazard provision, and decided that the facts were not such that the insurer could suspend coverage. These cases are generally decided upon based on the insured’s lacking knowledge of the increased risk, or because the court ruled the hazard not to be significantly increased.

 In the latter category, a small amount of fireworks stored on the premises was held not to be sufficient to invoke the increased hazard provision in Alabama Farm Bureau Mutual Casualty Insurance Co. v. Moore, 435 So. 2d 712 (Ala. 1983). A fire loss was denied on the basis of the increase in hazard provision because the insured reported $150 worth of fireworks on the loss claim form. Although the court implied that a larger amount of fireworks on the premises might be used as a basis to deny recovery, a small amount could not. Although the insurer was contending that any quantity of fireworks on the premises increased the risk, the court stated, “Under that standard, in a similar case, we would also have to conclude that any quantity of shotgun shells, gasoline, or any other explosive material kept on insured property would void a policy which contained a similar increased-hazard provision. This we are not willing to do.”

 In Johnson v. Allstate, US Bankr NJ, (1992), the insurer argued that the hazard was increased, and coverage suspended, for a fire loss where, (1) the insured’s mortgage company had foreclosed on the home, which the insurer argued was a change in ownership, (2) the termination of all utility services before the fire, (3) the insured had vacated the property prior to the fire (but not for 60 consecutive days), and that a defective lock left the garage and main dwelling unsecured, and (4) the character of the home changed from single family to single family with boarders.

 The court held that the insurance company had failed to demonstrate how the above-listed factors amounted to an increase in the fire risk. According to the court: the foreclosure action did not increase the risk of fire; the occasional rental of a room to a broader does not automatically lead to an increase in the risk of fire, especially in that no rooms were rented to boarders at the time of the fire; the termination of utility service would decrease, rather than increase, the risk of fire; and that the fact that certain doors remained unlocked does not automatically increase the risk of fire.

 It is important to recognize that a hazard with the knowledge or control of an insured is not the same as a hazard increased by any means within the control or knowledge of the insured. The former has been held as being not subject to the policy condition. The case of Triple-X Chemical Laboratories v. Great American Insurance Co., 370 N.E.2d 70 (1978) illustrates the distinction. Because a fire loss resulted from hazardous conditions that fire inspectors had brought to the attention of the insured and that the insured had not fully eliminated prior to the fire, the insurance company defended its rejection of coverage by citing the language under discussion. The Illinois appellate court held the insurance company liable for the loss, because the hazardous conditions had not been increased by the insured. Rather, they had existed at the time the policy was issued and had merely been brought to the attention of the insured at a later date. The fire loss was covered by the policy.

 Note that the courts have not generally found that the deteriorating financial condition of the insured triggers the increase in hazard provision. An “increase in moral hazard,” absent a physical change in condition of the premises, is not sufficient to invoke the clause. See Wallace v. Employers Mutual Casualty Co., 433 So. 2d 843 (Miss., 1983).

 Vacancy

 Coverage under the standard fire policy is suspended if building is vacant or unoccupied for more than sixty consecutive days. (Lines 33-35.) Although “vacant” and “unoccupied” may be used almost synonymously, as a general rule, the term “vacant” is used to describe a building devoid of inanimate contents; the term “unoccupied,” to describe a building without animate occupants. Because the exclusion operates in the event of vacancy or unoccupancy, either status by itself constitutes sufficient grounds for suspending coverage. With respect to dwellings, courts have held that “occupancy” means actual use of the premises by human beings as their customary residence.

 In Carroll v. Tennessee Farmers Mutual Ins. Co., 1979 C.C.H. (Fire & Casualty) 1264 (Tenn. Ct. Apps 1979), the vacancy or unoccupancy exclusion was held to apply in the loss of an insured house from which the owners had moved four months before it was destroyed by fire. The court ruled that even though the insureds had left some of their furniture in the house, had made periodic visits to care for their dogs kept on the premises and to tend their garden, and had stayed overnight in the house on several occasions, such activities did not constitute occupancy within the meaning of the fire policy. Occupancy, said the court, entails “[use of] the building for the purpose for which it was insured—as a residence.”

 In the 1991 case of Rooks v. Lincoln County Farmers Fire & Lightning Mutual Ins. Co., 1992 C.C.H. (Fire & Casualty) 3736 (Miss. Ct. App.), the court upheld a vacancy provision in a homeowners policy identical to that found in the New York standard fire policy. In this case, the insureds moved out of state, leaving the home unoccupied. Subsequently, the insurer paid a theft loss on personal property, and, at the insured’s direction, issued an amended coverage endorsement removing coverage for furniture, theft, and liability. After a fire loss, the insured claimed that the insurer was precluded from invoking the vacancy provision, because it had notice that the insured had left the home unoccupied. The insured argued that he would have obtained insurance elsewhere if made aware that fire coverage was suspended. The court ruled in the insurer’s favor stating the insured’s belief was contrary to the provisions of the policy.

 Explosion and Riot

 Explosion and riot also suspends coverage, unless fire ensues, and then fire damage only is covered. (Lines 36, 37.)

 Added Provisions and Waiver

 The policy specifically authorizes covering other perils (e.g. extended coverage) and other subjects of insurance (e.g. business interruption) by endorsement. (Lines 38-41.)

 Additional provisions are permitted regarding extent of application of insurance and contribution of company, but prohibits waiver of conditions except as authorized in policy and then only in writing. Act of company relating to appraisal or examination shall not be construed as waiving any conditions. (Lines 42-55).

 Cancellation

 The policy may be canceled by the insured at any time, short rate return premium to be paid on surrender of policy. (Lines 56-60.)

 Written cancellation notice (five days) by the company may or may not be accompanied by tender of pro rata unearned premium. If not so accompanied, then notice must state such refund will be made on demand. (Lines 56-67). Individual state laws with respect to cancellation by the insurer may provide for earlier notification and different requirements concerning return of unearned premium.

 The exact language of the provision respecting the insurer’s cancellation right is this: “This policy may be canceled at any time by this company by giving to the insured a five days’ written notice of cancellation.” Margolin v. Public Mutual Fire Ins. Co., 281 N.E.2d 728 (1972) was concerned with the authority of a state Director of Insurance to modify that language that had been statutorily confirmed by the legislature. The insurance company had amended its policy, with the approval of the Director, to the effect that cancellation could be had by the company by mailing a cancellation notice to the insured at the address shown on the policy. The policy covered a tenant occupied apartment and the notice, having been mailed to the insured at the address of the apartment, was returned unopened. A fire occurred in the meantime and a circuit court upheld the insured in her efforts to collect.

 The Illinois appellate court for the first district subsequently affirmed the lower court’s decision. The mailing notice was not consistent with the statutory provision that notice should be given. The appellate court’s review of the case contains an examination of the relationship between insurance statutes and the authority of insurance administrators.

 Note that by statute, some states have modified cancellation provisions, changing the time period necessary to effect a cancellation or the form by which notice must be presented to the insured.

 Mortgage Interests

 Loss may be made payable to mortgagee (not named as insured) who is entitled to ten days’ notice of cancellation. Mortgagee is obligated to undertake loss procedure if insured fails to do so. If the insurance company claims there is no liability to the insured, it is entitled to assignment of mortgagee’s claim against insured to extent of loss paid. (Lines 68-85.) The standard mortgage clause is the subject of a comprehensive review in this volume. (See Standard Mortgage Clause.

 Pro Rata Liability

 Liability of insurance company is limited to a pro rata share with other insurance for the “peril involved” on the property, whether collectible or not. (Lines 86-89.)

 Loss Procedure

 The insured is required to give the insurer immediate written notice of loss, protect property from further damage, separate damaged and undamaged property, put it in best possible order, make a complete inventory, stating quantity and cost of each article and amount claimed. Within sixty days after the loss, unless the insurer extends the time, the insured must render a sworn proof of loss, showing his knowledge and belief as to time and origin of loss; interest of insured and of all others in property; cash value and amount of loss on each item; encumbrances; other insurance changes in title, use, exposure, etc.; occupancy at time of loss; copy of all descriptions and schedules; and, if required, verified plans and specifications of damaged property. (Lines 90-113.)

 The policy requires the insured to exhibit to the insurer remains of property, submit to examinations under oath and produce for examination books of account, bills, invoices and other vouchers, or certified copies, and permit copies to be made, as often as required. (Lines 113-122.) Failure to submit to such requests can be a basis for voiding or denying coverage.

 One reason for the standard fire policy’s requirement that insureds submit to examination under oath is, of course, that it aids insurer’s investigations of suspicious losses—losses, for example, in which arson committed by the insured is suspected. Constitutional protections against self-incrimination have been held not to excuse an insured from satisfying this policy requirement. In Dyno-Bite, Inc. vs. Travelers Companies, 1981 C.C.H. (Fire & Casualty) 1395, a New York appeals court ruled that the refusal of one corporate officer to appear at an oral examination and the incomplete testimony of another officer who did attend the examination constituted a breach of the policy under which the corporation sought to recover for a fire loss. The Fifth Amendment privilege that excused the officers from answering questions about the fire did not excuse them from complying with all policy requirements precedent to recovery.

 In Allison vs. State Farm, 1989 C.C.H. (Fire & Casualty) 3909, the Mississippi supreme court upheld the insurance company’s denial of recovery for a fire after the insured refused to comply with the insurance company’s request for access to financial records. In this case, the fire was of an incendiary nature and the insurer wanted the insured’s financial records as part of the investigation. The insureds refused to supply the records, and refused to answer questions on the advice of their attorney. The court held persons claiming under a policy of insurance and their attorneys should be aware that they are required to respond to all reasonable inquiries and to give all reasonable assistance and that the failure to do so may well deny them recovery.

 Appraisal

 If insurer and insured fail to agree as to the amount of the loss or damage, each on written demand of either must select an appraiser, and these two appraisers select an umpire. If the appraisers fail for fifteen days to agree upon an umpire, a court of record appoints one. The appraisers must appraise the loss by stating separately the sound value and loss or damage to “each item.” Failing to agree, they must submit their differences only to the umpire. The agreement of any two, filed with the company, determines the amount of sound value and loss or damage. (Lines 123-140.)

 The portion of the policy provision that refers to the sound value and loss or damage to each item was interpreted by the Alabama supreme court—Commercial Union Insurance Co. vs. Ryals, 355 So. 2d 684 (1978)—to mean actual cash value and loss to the building as an item, rather than to each item the building comprises. The court held that it was proper for the appraisers to compute the loss to the building as one item and that an itemized account of the components which made up the damaged building was unnecessary. Thus, the word “Item” as used in the Appraisal clause refers to the property as scheduled on the policy rather than to the separate elements of each item.

 The standard Fire policy’s appraisal clause has been held to be a condition precedent to the insured’s right to bring an action for recovery under the policy. In Director vs. South Carolina Insurance Co., 49 Ore. App. 179 (1980), an Oregon court of appeals considered the case of a fire policy insured who, upon disagreeing with the insurer as to the amount of a fire loss, sought declaratory judgment by a court as to the meaning of certain policy language (the terms actual cash value and cost to repair and the application of the coinsurance requirement) before submitting to the prescribed appraisal procedure.

 The court ruled that such action could not be taken prior to appraisal as required by the policy, despite the insured’s contention that an appraisal carried out in the absence of some agreement as to the basis of valuation would be pointless. Against this assertion, the Oregon court cited with approval a decision by the Connecticut supreme court—Sullivan vs. Liberty Mutual Fire Insurance Co., 384 A.2d 384 (1978)—pointing out that disagreements over such issues as the meaning of actual cash value are among the appraisal problems to be resolved initially by a court-appointed umpire, not through litigation.

 Function of Appraisers and Umpires

 The function of appraisers and umpires in the appraisal procedure must be limited to that prescribed in the policy. Instances of appraisers’ or umpires’ exceeding the scope of the authority given them in the standard fire policy have occasionally found their way into court and produced vacated awards.

 In Allstate vs. Kleveno, 438 N.Y.S. 2d 384 (1981), a New York supreme court set aside a trial court’s order allowing the decision of a court-appointed umpire to stand when the umpire had appraised the insured and damaged property at a figure between the appraisals offered by the insured’s and the insurer’s appraisers. (The appraiser representing the insurer had submitted a written appraisal of $45,000; the insureds’ designated appraiser offered his oral opinion that the replacement cost of the property was $220,000. Taking what the trial court characterized as a “commonsense approach,” the umpire settled on a figure of $90,000 as the appropriate appraisal amount.)

 The supreme court, in setting aside the umpire’s determination, cited the fire policy language that prescribes the relationship of appraisers and umpire: The appraisers, failing to agree, “shall submit their differences, only, to the umpire. An award in writing . . . of any two . . . shall determine the amount of actual cash value and loss.” The court concluded on the basis of this language that the umpire “was not an arbitrator who was given sole authority to make a determination. He was to act only in concert and in conjunction with one of the other appraisers.”

 Applying the same policy language, the Nevada court held, in St. Paul vs. Wright, 1981 C.C.H. (Fire & Casualty) 1368, that the umpire and appraisers chosen to determine the amount of a fire loss to an insured motel exceeded the scope of their authority by interpreting policy provisions rather than merely determining the actual cash value of the loss. The basis of the dispute between the insurer and the insured was the issue of whether the fire policy covered reconstruction costs alone or also the additional cost of bringing the motel into compliance with the building code. In agreement with the lower appraisal figure that had been submitted by the insurer’s appraiser and that represented only the building’s reconstruction cost, the umpire submitted a memorandum stating that his determination of the amount of loss derived from a conclusion as to “whether or not the insuring party is liable for additional damages occasioned by the operation of an ordinance. . . .” The court found this memorandum to be evidence that “the umpire and appraisers clearly interpreted coverage provisions to arrive at the award figure” and in so doing exercised discretionary judgment not allowed them under the standard Fire policy’s Appraisal clause.

 Other Provisions

 The insurer has the options of repairing, replacing, rebuilding, or taking property, but abandonment of property to company is prohibited. (Lines 141-149.)

Loss is payable sixty days after receipt of proof and ascertainment of amount, by agreement or award. (Lines 150-156.)

 Note that this provision bases the calculation of a timely payment of loss on both the insured’s filing of a proof of loss and the “ascertainment” of the amount of that loss, either by written agreement between the insurer and the insured or, when such an agreement cannot be reached, by an award growing out of the appraisal procedure described in lines 123 to 140. The provision thus recognizes a period of time during which reasonable differences between the parties to the insurance contract may be resolved by methods prescribed in the contract itself.

 In awarding interest to insureds calculated from the date on which the covered loss became payable (a penalty commonly imposed on insurers found not to have been timely in their payment of claims), courts have generally enforced this provision strictly. A number of insureds, eventually awarded or paid the amounts stipulated in their proofs of loss, have unsuccessfully sought interest penalties against insurers applied from the date on which proof of loss was filed, the insureds’ argument being that the amount of loss was—in retrospect, at least—ascertainable by simple calculation on that date. In answering one such argument, the United States seventh circuit court of appeals ruled, in Wisconsin Screw Co. vs. Fireman’s Fund Insurance Co., 297 F.2d 697 (1962), that the standard fire policy implies “contractual intent that the payment of loss becomes due only after the amount either has been agreed upon or actually determined in a manner binding on the parties.” Similar decisions have been handed down in California—Carlstrom vs. Agricultural Insurance Co., 180 F.2d 286 (1950); and in Kansas—Millers National Insurance Co. vs. Wichita Flour Mills Co., 257 F.2d 93 (1958).

 Suit must be commenced within twelve months after loss and after compliance with policy requirements. (Lines 157-161.)

 Insurer is subrogated to insured’s right of recovery from other parties, to the extent of payment of loss. (Lines 162-165.)

 The insurer’s exercise of its rights of subrogation can be seen, for example, in State Farm Fire and Casualty Co. vs. Sentry Indemnity Co., 355 So. 2d 684 (1978). The pastor of a church and his wife lived in a house supplied for their use by the church. One day the pastor’s wife left a pot of grease unattended over a lit burner, and, in the woman’s absence from the parsonage, the grease caught fire and caused over $250,000 of damage to the dwelling. The three companies that insured the church building and the parsonage paid their shares of the loss and then took legal action to recover these amounts from the woman’s liability insurer. Because the insurance companies were subrogated to the rights of their insured (the church) they were entitled to bring this suit—which they won—to recover damages from the woman for her negligence in caring for church property.

 The subrogation rights an insurer acquires through the payment of loss are only those the insured could otherwise have exercised. For example, in Employers Mutual Casualty Co. vs. Griffin, 266 S.E.2d 18 (1980)—another case involving damage to church property—an insurer sought recovery in subrogation for sums it paid out following destruction of part of the insured church by a fire negligently caused by a church member. The North Carolina court of appeals rejected the insurer’s attempt at subrogation on the grounds that the church, which had the legal status of an unincorporated association, was not entitled to sue one of its own members under North Carolina law and that the church’s insurer consequently took “only the rights which the church would have.”