Interpretation in detail of Exclusion No. 7 under standard Fire and Special Perils Policy
The exclusion No.7 of Fire Tariff is herewith produced regarding the loss of Electronic/Electrical Equipment under Fire Policies.
This policy does not cover any loss, destruction or damage to any electrical/electronic machines apparatus, fixtures or fittings (excluding fans, and electrical wiring in dwellings) arising from or occasioned by overrunning. Excessive pressure, short-circuiting, arcing, self-heating, or leakage of electricity, from whatever cause (lightning included), provided that this exemption shall apply only to the particular electrical machine, apparatus, fixture, fitting or portions of electrical installations so affected and not to other machines of the electrical installations which may be destroyed by physical fire so set up.
Fire is a product of three ingredients i.e. Fuel, Heat, oxygen which may come into contact together at any time. The same is called as natural fire as per physics.
Fire Policies cover the pecuniary loss of Insured on account of natural fire spread to the subject matter of Insurance such as stocks/machinery etc. by external means and burnt or spoiled by smoke soot, besides other perils such as impact damage by Rail / Road vehicles or animals and STFI, etc.
Similarly, spontaneous combustion (Spontaneous combustion is nothing but an inherent characteristic of the subject matter of insurance which get themselves burnt by generated fire by internal means when the critical temperatures of subject matter exceed the atmospheric temperature just like happens in haystacks, Coal heaps, etc.) of the subject of matter of insurance is also excluded from indemnity as the spontaneous combustion is caused to subject matter by internal means of subject matter but not by spreading natural fire from external means.
The logical exclusion of fire loss of above cited Electrical and Electronic Equipment made by fire Tariff is solely based on that any fire developed by short-circuiting or excessive pressure in the circuits of electrical equipment does not fall under the meaning of natural fire as stated above. Secondly, such arcs, short-circuit burning of materials of electrical equipment are considered as damaged not by natural fire but by excessive electrical pressure (voltage or over current) developed within the electrical equipment by internal means due to various reasons such as voltage drop from power supply companies or insulation failure of windings or cables, etc to withstand against the developed over current within the power circuits of the Electrical equipment, etc.
Whatever may be the reasons for damage of Electrical equipment due to excessive pressure/short circuit etc. other than the damage of such electrical equipment by spreading to it by natural fire from external means is an exclusion under the policy. The logical conclusion made by fire Tariff Committee in this regard is, such damage or loss to electrical equipment not caused by a natural fire on which the policy is devised, but on artificial fire developed within the power circuit of electrical equipment due to high electrical overcurrent developed in the equipment due to reasons such as a drop of voltage or insulation failure, etc. 1) Power in single-phase line = Phase Current x Phase voltage x Power factor 2) Power in 3 Phase line =3 x Line current x Line Voltage x Power Factor When voltage drops in single phase or 3 phase lines, Current will shoot up to keep the rated power in KiloWatts to meet the load of equipment. As such, the loss of electrical equipment when they are under live condition any damage or loss of equipment is excluded by Fire Tariff Committee basing on the criteria that, such loss did not take place on account of natural fire spread to equipment but damage took place only by internal means of equipment, that also not by natural fire but the artificial fire in the form of arcs emanating from short-circuiting due to said insulation failure or voltage fluctuation, etc. Due to above said criteria, loss caused to electrical and electronic equipment while they are under live condition (under a flow of current in the line circuit as well as a control circuit), Fire Tariff made this exclusion specifically.
Though lightning is a peril covered under the scope of the policy, loss, destruction to any electrical/electronic machine, apparatus, fixture/fitting arising by overrunning excessive pressure, short-circuiting by the interaction of the electrical pressure (Surge voltage) of lightning with the electrical pressure of the equipment (voltage) is also an exclusion along with causes such as insulation failure, overloading, etc. which result into short-circuiting/arcing, etc. under the policy.
It implies, when any electrical/electronic equipment is not under live condition (operation) loss caused by lightning falls within the scope of policy as there will not be any electrical pressure/voltage of equipment to interact with the electrical pressure (surge voltage) of lightning.
Examples: Packed Transformers stock stored in the finished product godown of Transformers manufacturing company ready to be dispatched. A spare transformer installed in a factory not in a live condition either inline circuit or in the control circuit. A line transformer not under operation in a factory under lockout etc.
CONCLUSION
Any fire loss to the electrical or electronic equipment while they are not under live condition i.e. They are not underflowed of current in their circuits, cause of loss arising from or occasioned by overrunning, excessive pressure, short-circuiting, arcing, self-heating, or leakage of electricity, from whatever cause (lightning included), doesn’t arise.
As such exclusion No.7 of fire tariff under SFSP policies do not apply to electrical and electronic equipment/apparatus/fixtures, etc. when they are not under operation i.e. working conditions without the flow of current in their circuits. Whatever may be the cause of the fire and the claim towards such equipment damaged are admissible under the fire policies and payable by insurers.
A novel example is presented in this context
Example: A wind power generating Mill was hit by a lightning strike and the windings of the generator were burnt besides breakage of fan leaves of system. Insured furnished bills of renewal of system to bring it into working condition for Rs.2 lacs towards rewinding charges of generator windings burnt and Rs.50000/- towards a replacement of the fan leaves of the system broken due to lightning strike. Find out the amount payable to insured under a fire policy covered with the adequate sum insured. Salvage offer by insured for Rs.20,000/- accepted by a surveyor and the same is taken into the assessment.
- As per the system meters when the windmill rotating fan wheel (of leaves) is not rotating when the system was switched off for preventive maintenance of machinery.
- As per the system meters when the windmill fan wheel (of leaves) is rotating.
- When the fan wheel of the system is not rotating that means there is no current flow in the generator windings of the system. As such rewinding charges of Rs.2 lacs are admissible besides Rs.50,000/- towards a replacement of fan leaves of the system caused by lightning as per the above criteria stated under the subheading conclusion of the article. Depreciation does not apply to generator windings and rotating wheel leaves.
- When the fan wheel of the system (fan leaves) is rotating and the loss is occurred by the lightning strike, it is quite clear that there is electrical pressure, called a voltage which is existing in the generator windings of the system. As such as stated above when the electrical pressure existing in the equipment falls under the exclusion No.7 the winding losses are not payable because such charges fall under the said exclusion. However, the loss of breakage of leaves of the rotating wheel fall under the scope of the policy as the leaves of the rotating wheel does not contain any electrical voltage or pressure and loss due to lightning stroke is a covered peril under the fire policy.
By Mr. Boyapati Suresh Babu, Hyderabad, Published in The Insurance Times, October 2005
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