4.1 The 1943 New York Standard Fire Policy: Insuring Agreement, Conditions, Proof of Loss, and Actual Cash Value
Key Takeaways
The Standard Fire Policy insures against direct loss by fire, lightning, and removal from endangered premises, paying the lesser of actual cash value, the cost to repair or replace with like kind and quality, or the stated limit, and never more than the insured's interest.
Coverage is suspended while the hazard is increased by means within the insured's control or knowledge, or while a described building is vacant or unoccupied beyond 60 consecutive days.
The insured must give immediate written notice and file a sworn proof of loss within 60 days after the loss unless the insurer extends the time in writing (lines 90-99).
The insurer may cancel on 5 days' written notice to the insured and must give a named mortgagee 10 days' written notice (lines 56-73).
The policy requires suit within 12 months after the loss, but in Illinois that period is tolled from the filing of proof of loss until denial (215 ILCS 5/143.1).
Why a 1943 Form Is Still Tested
The 1943 New York Standard Fire Policy (SFP), codified in New York Insurance Law Section 3404, became the model for fire policies across the country. Illinois does not prescribe it as a mandatory form, but its wording still underlies modern property conditions, and the Pearson outline lists it under personal lines (basic coverages, provisions and clauses; proof of loss with periods of limitation tolled; actual cash value) and as a reference for unfair claims practices. The Illinois mine subsidence law also defines a covered "policy" as one providing the coverage of the Standard Fire Policy and Extended Coverage Endorsement (215 ILCS 5/802.1(h)).
The SFP has a declarations page, an insuring agreement, and 165 numbered lines of conditions. Coverage is broadened by endorsements (lines 38-41), most commonly Extended Coverage: windstorm, hail, explosion, riot and civil commotion, aircraft, vehicles, and smoke.
The Insuring Agreement
The insurer covers the named insured and legal representatives to the extent of the lesser of:
- the actual cash value of the property at the time of loss;
- the cost to repair or replace with material of like kind and quality within a reasonable time after the loss, without allowance for increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair, and without compensation for loss from interruption of business or manufacture; or
- the amount of insurance stated,
but in no event for more than the interest of the insured, against all direct loss by fire, lightning, and removal from premises endangered by the perils insured against. Property removed for preservation is covered pro rata for five days at each place to which it is moved.
Three exam points follow from this paragraph:
- Actual cash value is the basic measure. The SFP does not define ACV. Illinois regulation 50 Ill. Adm. Code 919.80(d)(8)(A) supplies the residential rule: replacement cost at the time of loss less depreciation, if any, with the depreciation worksheet available on request.
- No ordinance or law coverage. Code-upgrade costs are excluded unless an endorsement adds them.
- No business interruption. Indirect loss requires separate coverage.
The agreement also says assignment of the policy is not valid without the insurer's written consent. Assignment of a claim after a loss is different: the right to collect for an existing loss is generally assignable because it does not change the risk the insurer accepted.
Lines 1-55: Fraud, Excluded Property, Excluded Perils, and Suspension
| Lines | Provision | Rule |
|---|---|---|
| 1-6 | Concealment, fraud | The entire policy is void if, before or after a loss, the insured willfully concealed or misrepresented any material fact, or committed fraud or false swearing relating to the insurance |
| 7-10 | Uninsurable and excepted property | Never covers accounts, bills, currency, deeds, evidences of debt, money, or securities; covers bullion or manuscripts only if specifically named in writing |
| 11-24 | Perils not included | Enemy attack, invasion, insurrection, rebellion, revolution, civil war, usurped power; order of civil authority except destruction to prevent the spread of a fire that did not start from an excluded peril; neglect of the insured to use all reasonable means to save property at and after a loss or when neighboring fire endangers it; and theft |
| 25-27 | Other insurance | May be prohibited or limited by endorsement |
| 28-37 | Conditions suspending or restricting insurance | No liability for loss (a) while the hazard is increased by means within the insured's control or knowledge; (b) while a described building is vacant or unoccupied beyond 60 consecutive days; or (c) from explosion or riot unless fire ensues, and then only for the fire loss |
| 42-48 | Added provisions | Endorsements may add terms not inconsistent with the policy |
| 49-55 | Waiver | No waiver is valid unless in writing added to the policy; appraisal or an examination does not waive any provision |
Illinois modifies the fraud condition's reach for application statements through 215 ILCS 5/154: a misrepresentation in the application defeats coverage only if stated in the policy or written application and made with actual intent to deceive or material to the risk (see 2.2).
Lines 56-89: Cancellation, Mortgagee, and Pro Rata Liability
Cancellation (lines 56-67). The insured may cancel at any time and receives the excess premium above customary short rates. The insurer may cancel on 5 days' written notice, refunding the excess above the pro rata premium on demand. In Illinois, the cancellation statutes in 215 ILCS 5/143.11-143.21 override this 5-day period for covered policies (see 2.2).
Mortgagee interests and obligations (lines 68-85). When loss is payable to a mortgagee not named as an insured:
- the mortgagee's interest may be cancelled only on 10 days' written notice to the mortgagee;
- if the insured fails to render proof of loss, the mortgagee, on notice, must render it within 60 days and is then subject to the appraisal, payment, and suit provisions;
- if the insurer denies liability to the owner but pays the mortgagee, it is subrogated to the mortgagee's rights to the extent of payment, without impairing the mortgagee's right to sue, or it may pay off the mortgage debt and take an assignment of the mortgage.
Pro rata liability (lines 86-89). The insurer is liable for no greater proportion of a loss than its amount of insurance bears to the whole insurance covering the property against the peril involved, whether collectible or not.
Example. Policy A ($200,000) and Policy B ($100,000) cover the same building for fire. A $90,000 fire loss is shared $60,000 by A and $30,000 by B. "Whether collectible or not" means that if B's insurer is insolvent, A still pays only $60,000.
Lines 90-122: Requirements in Case Loss Occurs
The insured must:
- give immediate written notice of any loss;
- protect the property from further damage;
- separate damaged and undamaged personal property and put it in the best possible order;
- furnish a complete inventory of destroyed, damaged, and undamaged property showing quantities, costs, actual cash value, and amount claimed;
- within 60 days after the loss, unless extended in writing, render a proof of loss signed and sworn to by the insured, stating the time and origin of the loss, the interest of the insured and all others, the ACV and amount of loss for each item, all encumbrances, all other insurance (valid or not), changes in title, use, occupancy, location, possession, or exposures, building occupancy at the time of loss and whether on leased ground, copies of descriptions and schedules in all policies, and, if required, verified plans and specifications;
- exhibit what remains of the property as often as reasonably required;
- submit to examinations under oath and sign them; and
- produce books of account, bills, invoices, and vouchers and allow copies.
Compare modern forms. ISO homeowners forms require the proof of loss within 60 days after the insurer's request, which is more favorable to the insured than the SFP's 60 days after the loss. Illinois Part 919.60(b) bars an insurer from requiring a proof of loss in less time than the policy allows.
Lines 123-165: Appraisal, Options, Abandonment, Payment, Suit, Subrogation
| Lines | Provision | Rule |
|---|---|---|
| 123-140 | Appraisal | If the parties disagree on ACV or amount of loss, either may demand appraisal in writing; each selects a competent and disinterested appraiser within 20 days; the appraisers select an umpire, and if they fail to agree for 15 days, a judge of a court of record in the state where the property is located selects one; the appraisers state ACV and loss separately for each item and submit only differences to the umpire; an itemized award by any two determines ACV and loss; each party pays its appraiser and they share the umpire and appraisal expenses equally |
| 141-147 | Company's options | The insurer may take all or part of the property at the agreed or appraised value, or repair, rebuild, or replace with like kind and quality, on notice within 30 days after receiving the proof of loss |
| 148-149 | Abandonment | There can be no abandonment of property to the insurer |
| 150-156 | When loss payable | 60 days after proof of loss is received and the loss is ascertained by written agreement or a filed appraisal award |
| 157-161 | Suit | No suit unless all policy requirements are met and suit is commenced within 12 months next after inception of the loss |
| 162-165 | Subrogation | The insurer may require an assignment of the insured's rights of recovery against any party to the extent of its payment |
Illinois changes two of these results. Section 397.05 makes the insurer pay the insured's appraiser and umpire when the insured requests appraisal and the full appraised loss is upheld. Section 143.1 tolls the suit-limitation period from the date proof of loss is filed until the claim is denied in whole or in part.
Worked tolling example. A fire occurs January 10. The insured files proof of loss on March 1, after 50 days. The insurer denies part of the claim on September 1. Under a 12-month suit clause, about 315 days remain on September 1, because the 184 days from March 1 to September 1 do not count. Part 919.80(d)(8)(C) requires the denial letter to state the tolled days and remaining days.
Under the Standard Fire Policy, which property is never covered, even if specifically named?
Bullion
Manuscripts
Money and securities
Household furniture
Two policies cover a building against fire: Company A for $150,000 and Company B for $50,000. A $60,000 fire loss occurs, and Company B is insolvent. Under the Standard Fire Policy's pro rata liability clause, how much does Company A pay?
$60,000
$15,000
$50,000
$45,000
A rented dwelling insured under a Standard Fire Policy has been empty and unfurnished for 75 consecutive days when a fire occurs. No endorsement modifies the policy. What is the result?
Coverage is suspended because the building was vacant or unoccupied beyond 60 consecutive days
The loss is fully covered because fire is a named peril
The insurer pays 85% of the loss
Coverage applies only to the land
When must the insured file a sworn proof of loss under the Standard Fire Policy, absent a written extension?
Within 60 days after the insurer's written request
Within 60 days after the loss
Within 12 months after the loss
Within 30 days after the insurer's inspection
Sections you finish are checked off in the contents.