Spontaneous combustion happens when an organic matter catches fire due to its own internal source. In combustion, fuel gets oxidized due to light and heat in its surrounding. For example – agriculture produce can set itself on fire due to certain hot weather condition. Coal is another product which itself is a source of fuel, the storage of coal can also result in an accidental fire. The same goes with commercial building or warehouses storing flammable liquids and oil. Hence commercial places or industries with these self-fire generating products must safeguard themselves with appropriate insurance clause against such calamities.
Spontaneous combustion is normally an exclusion in property and fire insurance policies. It is not included in the standard fire and special perils standalone policy. Spontaneous combustion add on cover provides coverage against damage or destruction due to fire to the insured’s property from spontaneous combustion. It needs to attach to the main policy as an add-on cover by paying extra premium. In insurance terms, spontaneous combustion is a process whereby the fire may be caused due to spontaneous combustion of own natural heating, fermentation, or natural heating or drying process.
Star Corporation is in the business of producing and selling soya seeds. The company has its own manufacturing and packing plant in Banda, Uttar Pradesh.
The soya seeds are processed in Galvanized iron corrugated (GIC) silo. During the summer months, the temperature in some parts of India can reach it's high 40’s. Banda in Uttar Pradesh is one of the places which is prone to experiencing high temperature.
The company took insurance policy for stock stored in the warehouse mostly soya seeds. The company also took add-on coverage of spontaneous combustion after paying additional premium for the same on the fire insurance policy. On 15th May 2015, the summer was at its peak. Due to soaring temperature during the day the soya material absorbed heat in the Galvanized iron corrugated (GIC) silo. The heat got transferred in the middle portion of the silo which resulted in the burning of the volatile oil content of soya seeds. The seeds were completely damaged due to burning of the oil in it. The spontaneous combustion heat and fire also damaged the equipment.
Star Corporation, fortunately, had appropriate coverage of Standard Fire and Special Perils policy along with the spontaneous combustion add-on cover. The case was investigated by the surveyors and the report concluded spontaneous combustion as a cause of the burning of stock and damage to the equipment. The star corporation was compensated for the loss and damage. Having the right insurance cover ensured the operations were swiftly back in action and the company did not suffer long downtime.
Here the fire insurance company settled two claims for Star Corporation
The claim related to loss of equipment and machinery due to fire
The claim related to loss of stock (soya seeds)
Hence, it is absolutely crucial to understand the provisions of the fire insurance policy and which add-on covers to attach to the main policy to get the right value from the same.