The Standard Fire Policy and the 165 Lines

In the world of insurance, the Standard Fire Policy (SFP) serves as the fundamental building block for nearly all modern property insurance contracts. While it is rarely issued today as a standalone policy, its provisions, conditions, and exclusions are woven into the fabric of Homeowners and Commercial Property forms. For candidates preparing for the complete P&C exam guide, understanding the SFP is crucial because it establishes the 'least common denominator' for property coverage.

The SFP is often referred to as the '165 lines' because the original standardized version contained exactly 165 numbered lines of text outlining the policy's conditions. These lines dictate how losses are settled, what duties the insured has after a loss, and the circumstances under which a claim might be denied. Most states require that any property policy issued must provide coverage that is at least as favorable as the provisions found in the Standard Fire Policy.

The Standard Fire Policy is a named peril contract, meaning it only covers losses caused by the specific causes of loss listed in the policy. Traditionally, the SFP covers three primary perils:

• Fire: To be covered, the fire must be a hostile fire. This is a fire that occurs outside of its intended boundaries (such as a spark jumping out of a fireplace onto a rug). A friendly fire, which stays within its intended container (like the flames inside a wood stove), is not covered unless it escapes and becomes hostile.
• Lightning: Damage caused by naturally occurring electricity from the atmosphere.
• Removal: This is a unique peril that provides coverage for property while it is being removed from the premises to protect it from further damage by a covered peril. For example, if a fire is approaching a building and the owner moves furniture to a warehouse, the furniture is covered at the new location for a specified number of days (typically five days).

The 165 lines of the SFP contain several critical legal concepts that appear frequently on insurance exams. These provisions define the relationship between the insurer and the insured:

• Concealment and Fraud: The policy is void if the insured willfully conceals or misrepresents a material fact.
• Property Not Covered: The SFP specifically excludes items that are difficult to value or highly susceptible to fraud, such as currency, deeds, and evidence of debt.
• Cancellation: The policy outlines the requirements for both the insured and the insurer to terminate the contract, including the number of days' notice required for cancellation.
• Appraisal: If the insurer and the insured disagree on the amount of the loss, either party can demand an appraisal. Each selects an appraiser, and the two appraisers select an umpire.
• Subrogation: The insurer maintains the right to seek recovery from a third party who caused the loss after the insurer has paid the insured.
• Suit Against the Company: The insured must meet all policy requirements before they can bring a lawsuit against the insurer, and the suit must usually be initiated within a specific timeframe after the loss.