Massachusetts Standard Fire Policy and Property Cancellation

This chapter covers the Massachusetts standard fire policy, the form every Massachusetts fire policy must follow, and the Massachusetts rules on cancelling and nonrenewing property insurance. The fire policy’s fraud clause and its appraisal provision (the reference to three referees) are covered in the chapter on Massachusetts property and casualty laws; the next chapter covers homeowners insurance and commercial inland marine.

Massachusetts standard fire policy (Mass. Gen. Laws ch. 175, § 99)

What the standard policy is

No company may issue a policy insuring Massachusetts property against loss by fire, or fire and lightning, except on the standard form written into § 99, apart from the exceptions that section lists (Mass. Gen. Laws ch. 175, § 99). A company may print the words “Massachusetts Standard Policy” on the policy, and must print on its filing-back: “In case of fire notify the company or its local agent at once in writing” (§ 99, clauses Sixth and Seventh).

Provisions adding to or modifying it go on slips or riders signed by the company’s officers or agents, and any other peril or subject of insurance is added by endorsement in writing (§ 99). Four provisions may not be added to or modified at all: the mortgagee’s rights, cancellation, the reference of a loss to three referees, and the limitation of suits (§ 99, clause Ninth).

Related rules in chapter 175:

• No company, agent or broker may knowingly issue or renew a fire policy for an amount that, with other insurance, exceeds the fair value of the property, or for a term longer than seven years (§ 95).
• An applicant for fire insurance on a building completes an application form prescribed by the Commissioner, with enough information to determine the property’s actual cash value and ownership. It is required before the policy is first issued, when the named insured or mortgagee changes, and when coverage rises by more than 25 per cent. The requirement does not apply to owner-occupied dwellings of four units or less and certain other risks (§ 98).

Insuring agreement and policy period

The company insures the insured:

• To the extent of the actual cash value of the property at the time of loss
• Without compensation for loss from interruption of business or manufacture
• Never for more than the insured’s interest in the property
• Against all loss by fire, lightning and removal from premises endangered by those perils (§ 99)

Property removed to preserve it from an insured peril is covered pro rata for five days at each place it is necessarily moved to (§ 99). The policy period begins and ends at 12:01 a.m. (“one minute past twelve o’clock ante-meridian”), standard time at the location of the property (§ 99). An assignment of the policy is not valid without the company’s written consent (§ 99).

The Commissioner may approve a provision replacing the actual cash value loss settlement; the replacement must give a reasonable, clearly specified coverage definition and may be equal to, greater than or less than actual cash value (§ 99, clause Twelfth A). Under an approved provision of this kind, a Massachusetts policy may settle a loss on a basis other than actual cash value.

When an insured building is totally destroyed by fire, the company is liable only for its actual value; an insured who paid premium on a larger amount is reimbursed the proportionate excess premium, with interest at six per cent a year from the date of issue (§ 96).

Excluded property and perils

The policy does not cover accounts, bills, currency, deeds, evidences of debt, money or securities, and does not cover bullion or manuscripts unless they are specifically named in writing (§ 99).

The company is not liable for loss caused directly or indirectly by (§ 99):

• Enemy attack, invasion, insurrection, rebellion, revolution, civil war or usurped power
• An order of civil authority, except destruction ordered at the time of a fire to stop it from spreading (if that fire did not start from an excluded peril)
• The insured’s neglect to use all reasonable means to save and preserve the property at and after a loss, or when it is endangered by fire next door
• Theft

An insurer may also state that the policy does not cover loss caused by nuclear reaction, nuclear radiation or radioactive contamination, but even then, direct loss by fire resulting from them is covered (§ 99A). A commercial policy may exclude loss caused by an act of terrorism as defined in the federal Terrorism Risk Insurance Act of 2002, while that program lasts (§ 99, clause Thirteenth).

Conditions suspending or restricting insurance

Unless otherwise provided in writing, the company is not liable for loss occurring (§ 99):

Condition	Rule
Increased hazard	While the hazard is increased by any means within the insured’s control or knowledge
Vacancy or unoccupancy, residential premises of three units or less	Beyond 60 consecutive days
Vacancy or unoccupancy, all other premises	Beyond 30 consecutive days
Explosion or riot	Not covered unless fire follows, and then only the fire loss

For example, a two-family house left empty for 70 consecutive days has passed the 60-day limit, and a fire on day 70 is not covered unless the policy provides otherwise in writing. A vacant store would have lost coverage after 30 days.

Other insurance may be prohibited, or the amount of insurance limited, by endorsement. No permission affecting the insurance, and no waiver of any provision, is valid unless granted in the policy or written onto it (§ 99).

Mortgagee clause (Mass. Gen. Laws ch. 175, §§ 97, 99)

When the policy is payable to a mortgagee, no act or default of anyone other than the mortgagee (or its agent or those claiming under it), before or during the policy term, makes the policy void as to the mortgagee or affects its right to recover for a loss to the real estate (§ 99).

• The mortgagee must pay on demand for any increase in risk the insured has not paid for.
• If the company owes the mortgagee for a loss when it owes the owner nothing, and it elects to pay the mortgagee the full amount secured, the mortgagee must assign the mortgage, note and debt to the company (§ 99).
• Where several mortgagees are protected, the company pays them in the order of their priority, up to the amount it owes (§ 97).

The mortgagee also gets a longer cancellation notice than the insured (see Cancellation and nonrenewal, below).

Pro rata liability

The company pays no greater share of a loss than its amount of insurance bears to all insurance covering the property against the same peril (§ 99). If two policies of $100,000 and $300,000 cover a building, the first pays one quarter of any covered loss.

Requirements in case of loss (Mass. Gen. Laws ch. 175, §§ 99, 102)

After a loss, the insured must (§ 99):

• Give immediate written notice to the company
• Protect the property from further damage
• Separate damaged and undamaged personal property and put it in the best possible order
• Furnish a complete inventory showing the quantity, description, actual cash value and amount of loss claimed
• Forthwith render a signed, sworn statement in proof of loss
• As often as reasonably required, show what remains of the property, submit to examinations under oath and sign them, and produce books of account, bills and invoices for examination

Failing to render the sworn statement at once does not bar recovery if the insured promptly gives written notice of the fire and its location, and then renders the sworn statement immediately after the company asks for it in writing (§ 102). The same rule applies to losses from any hazard under any policy issued in Massachusetts (§ 186B).

The company’s obligations after a loss

Within 30 days after the insured submits the sworn statement, the company must pay what it owes (set by the referees if the parties do not agree) or replace the property with property of the same kind and goodness. Alternatively, within 15 days after the statement, it may notify the insured that it will rebuild or repair (§ 99).

• There can be no abandonment of the property to the company, and the company never owes more than the sum insured, with interest once the loss is payable (§ 99).
• The company owes interest at one per cent over the prime rate on the agreed figure, starting 30 days after it receives an executed proof of loss for that figure, for as long as the claim is unpaid (§ 99).
• The company may require the insured to assign all rights of recovery against anyone responsible for the loss, to the extent the company pays it (subrogation) (§ 99).
• Before paying a claim for loss to real property of $5,000 or more, other than an owner-occupied one- to four-family dwelling, the company must require a certificate of municipal liens and pay the city or town the outstanding liens it shows, up to the loss payable (§ 99, clause Fourteenth).
• Before paying a claim for loss to a building of $1,000 or more, the company must give ten days’ written notice to the local building commissioner or inspector and to the board of health or board of selectmen (§ 99, clause Fifteenth).

Suit against the company

A suit on the policy must be started within two years from the time the loss occurred. If a suit is enjoined or abated, a new one may be brought within one year after the injunction is dissolved or the suit abated (§§ 99, 187A). If the loss was referred to referees within the two years, the insured always has at least 90 days after the award, as the chapter on Massachusetts property and casualty laws explains.

Other required provisions

• Tenant relocation. Every fire policy on multi-unit residential property must provide, by endorsement, up to $750 per rental unit, with no deductible, for the actual relocation costs of a tenant or lawful occupant displaced by fire. The landlord must tell each tenant about the benefit in writing at the start of the tenancy, and a lease clause waiving it is void (§ 99, clause Fifteenth A).
• Notice of reduced coverage. A company that eliminates or reduces coverages, conditions or definitions must attach a printed notice of the changes to each policy. Without that notice, the coverage stays in full force (§ 99, clause Sixteenth).

Cancellation and nonrenewal (Mass. Gen. Laws ch. 175, §§ 99, 193P, 4C)

The chapter on Massachusetts property and casualty laws covers how any policy is cancelled under §§ 187C and 187D: service of the notice, the certificate of mailing and the return premium. The standard fire policy supplies the notice periods and grounds.

Cancellation under the standard fire policy (Mass. Gen. Laws ch. 175, § 99)

By the insured. The policy is cancelled at any time at the insured’s request. On demand and surrender of the policy, the company refunds the paid premium in excess of the customary short rates for the expired time.

By the company.

Reason	Notice to the insured	Notice to the mortgagee
Any permitted reason other than nonpayment	5 days written	20 days written
Nonpayment of premium	10 days written	20 days written

The company refunds the paid premium in excess of the pro rata premium for the expired time; if not tendered with the notice, it is refunded on demand, and the notice must say so. The notice must state, or be accompanied by a statement of, the specific reason or reasons for cancelling. When the reason is nonpayment, the insured may keep the coverage by paying at any time before the effective date of cancellation.

After 60 days. Once the policy has been in effect 60 days, or 60 days after any anniversary date, a cancellation is effective only if based on one of these, occurring after the policy’s effective date:

1. Nonpayment of premium
2. Conviction of a crime arising out of acts increasing the hazard insured against
3. Discovery of fraud or material misrepresentation by the insured in obtaining the policy
4. Discovery of willful or reckless acts or omissions by the insured increasing the hazard insured against
5. Physical changes in the property that make it uninsurable
6. A determination by the Commissioner that continuing the policy would violate the law

Sidenote

Know this...

A short-rate refund applies when the insured cancels; a pro rata refund applies when the company cancels. The mortgagee always gets 20 days’ notice of a company cancellation, even when the insured gets only 5 or 10.

Nonrenewal of a dwelling fire policy (Mass. Gen. Laws ch. 175, § 193P)

A policy covering a dwelling or its contents against fire must promise written notice of nonrenewal at least 45 days before the policy expires, stating, or accompanied by a writing stating, the specific reasons. The notice goes to the named insured, or to the agent or broker who negotiated the policy (and must go to the agent or broker if one executed the policy for the company); an agent or broker who receives it must send the insured a copy within 15 days, unless the agent has replaced the insurance. No notice is needed when an insurer in the same group issues a succeeding policy on the same terms and conditions; an insurer that moves the insured to a different company in its group must tell the insured in writing of any changes in coverage when the new policy is issued (§ 193P).

Prohibited grounds for homeowners decisions (Mass. Gen. Laws ch. 175, § 4C)

An insurer writing homeowners insurance, and the joint underwriting association under chapter 175C (the FAIR Plan), may not take into account an applicant’s or insured’s race, color, religious creed, national origin, sex, age, ancestry, sexual orientation, children, marital status, veteran status, receipt of public assistance or disability in deciding whether to provide, renew or cancel homeowners insurance (§ 4C).

Lesson summary

• Every Massachusetts fire policy follows the standard form in ch. 175, § 99. Riders may add to it but may never change the mortgagee, cancellation, three-referee or suit limitation provisions.
• The policy pays actual cash value (unless the Commissioner approves another basis), never more than the insured’s interest, for fire, lightning and removal. It begins at 12:01 a.m. standard time at the property, and an assignment needs the company’s written consent.
• It excludes money, securities, deeds and similar property, and war, civil authority, neglect and theft. Coverage is suspended during an increased hazard, after 60 consecutive days of vacancy (residential, three units or less) or 30 days (other premises), and for explosion or riot unless fire follows.
• After a loss, the insured gives immediate written notice, protects and inventories the property, and files a sworn proof of loss. The company pays or replaces within 30 days, or announces a rebuild within 15 days, and owes interest at 1% over prime from 30 days after an executed proof of loss.
• Suit must be filed within two years of the loss. Multi-unit residential policies carry up to $750 per unit in tenant relocation benefits, with no deductible.
• The company may cancel on 5 days’ notice (10 days for nonpayment), with 20 days’ to the mortgagee and the specific reasons stated. After 60 days only six listed grounds are allowed. A dwelling fire nonrenewal needs 45 days’ notice with reasons.