• The fire insurance is mainly based on the principle of Indemnity
which is controlling principle as far as the special doctrines are
• Such as:
• Reinstatement- replace or repair of lost/damaged property.
• Subrogation- step into the shoes of insured and suits against third
• Contribution- sharing the loss by insurers as per agreement.
• Insurance has been designed to reimburse the cost of repair,
reconstruction or replacement of the property damaged or destroyed
in a fire.
• Besides, fire insurance also covers property loss or damages due to
smoke, water and damages caused by the firefighters.
• Reinstatement means replace or repair the actual lost property.
• In Anderson v. Commercial Assurance Co., (1855) CADJQB 146(CA)
• Sutherland v. Sun Fire Office(1852) 14 Dunnl, 775.
• This right of the insurers to reinstate the property instead of paying
the money may spring up:
• (a) either from a contract in the form of a clause under the policy or
• (b) under a statute.
• Under the reinstatement value clause, the damaged property is
replaced by a new property of the same type.
• The reinstatement value is a method of claim settlement under a fire
• Subrogation means the insurance company will step into the
shoes of the insured and files a case against third party who
cause the loss.
• In Yorkshire Insurance Co v. Nesbet Shippoing Co. It was
applied by the common law courts in insurance cases long
before the fusion of law and equity.
• The important type of right in respect of which subrogation
arises are rights arising out of a tort, contract or statue.
• It says that the policyholder can only realize the actual value of
the loss or damage and in case the damaged product has any
value left or there is any right against a third party regarding
that, it should also be passed on to the insurance company.
• The doctrine of subrogation will be applicable to non-life insurance
but not life insurance.
• Insurer must pay before he claims subrogation held in Scottish Union
v Davis (1970) 1 Lloyd’s Rep 1.
• Assure must have been able to bring action.
• In Petrofira v. Magnaload, (1983) 2 Lloyed’s Rep 91.
• Where two ships belonging to the same owner collided by fault of
one of them. Similarly, where the assured and the wrongdoer are co-
assureds, the doctrine does not apply.
• Contribution arises because of the liberty of the assured to insure the
same property with more than one insurer which is called double
• The following conditions must be satisfied:
• Same subject matter
• Same interest of the same insured
• Same peril
• Policy must have been in force
• Enforceable at the time of loss.
• The principle of contribution states that if the loss arises and you
have taken more than one insurance policy, then the loss will be
covered by the policies based on the proportion of the coverage the
insurance policy provides.
INDEMNITY VS REINSTATEMENT
• The principle of indemnity asserts that on the happening of a
loss the insured shall be put back into the same financial
position as he used to occupy immediately before the loss. In
other words, the insured shall get neither more nor less than the
actual amount of loss sustained.
• The reinstatement value is a method of claim settlement under
a fire insurance policy. In the case of the reinstatement value
clause, the insurance company reinstates the damaged
property or asset by paying its replacement value as the claim
amount to the policyholder.
INDEMNITY VS SUBROGATION
• Property and liability insurance is based on the principle of
indemnity— an insured should not be allowed to profit from his
losses. If an insured could sue and collect damages for a loss
and collect insurance for the same loss, then the insured would
profit from the loss. Subrogation prevents this.
• Principle of subrogation refers to the practice of substitution of a
person or group by another in cases of debt claims in
insurance. Subrogation is an important component of indemnity
principle, which is a differentiating factor between a commercial
contract and an insurance contract.
INDEMNITY VS CONTRIBUTION
• Contribution principle applies when the insured takes more than
one insurance policy for the same subject matter. It states the
same thing as in the principle of indemnity, i.e. the insured
cannot make a profit by claiming the loss of one subject matter
from different policies or companies.
• The Doctrine of Subrogation and Contribution are an extension
of the principle of indemnity. This article primarily focuses on the
fact that insurance contracts are contracts of indemnity wherein
there is no gain or profit in any way to the insured as a
consequence of an accident or loss.
• The aim of Contribution is to distribute the loss among the different
persons liable so as to give each and all of them a diminution of their
individual loss. SUBROGATION it will arise when the assured must have
concurrent remedies against the person causing the loss or damage and
against the insurer.
• The Doctrine of Subrogation and Contribution are an extension of the
principle of indemnity. The fact that insurance contracts are contracts of
indemnity wherein there is no gain or profit in any way to the insured as a
consequence of an accident or loss.
• It says that the insurer (which is the insurance company) pays for a loss to
the insured (an individual or company) due to the wrongdoing of a third
party, then the insurer has the authority to subrogate the rights of insured
and therefore can prosecute a suit against the wrongdoer for the recovery
of the amount.