3.5 Standard Fire Policy

The Standard Fire Policy (SFP) of New York serves as the foundation for most modern property insurance policies. The policy is based on a standardized set of 165 lines of coverage language established by law to define the minimum protections provided under a property insurance contract. In states that have adopted the Standard Fire Policy, insurers are generally prohibited from issuing property insurance policies that provide less coverage than that required by the 165-line standard. While insurers may broaden coverage through endorsements or additional policy provisions, they cannot make coverage more restrictive than the protections established by the Standard Fire Policy.

The Standard Fire Policy (SFP) provides coverage for direct physical loss or damage caused by the named perils of fire and lightning. Coverage also extends to property damaged while being removed from premises that are endangered by a covered fire or lightning event. To be covered, the loss must result directly from one of these insured perils.

Note

In many property insurance policies, fire and lightning are combined and insured as a single named peril, often referred to as the Fire or Lightning peril. Coverage for property that is damaged while being removed from premises threatened by a covered fire or lightning event is typically provided under the policy's Additional Coverages section rather than as part of the basic peril coverage.

In the event of a covered loss, the insurer will pay no more than the smallest of the following amounts:

• The actual cash value (ACV) of the damaged property at the time of the loss.
• The amount reasonably necessary to repair or replace the damaged property with materials of like kind and quality within a reasonable period after the loss. This amount does not include additional costs resulting from the enforcement of building codes, ordinances, or other laws regulating construction.
• The insured's financial interest in the property at the time of the loss.

These provisions support the principle of indemnity by limiting recovery to the amount of the actual loss sustained, ensuring that the insured is restored to their financial position before the loss without profiting from the claim.

Certain types of property are generally considered uninsurable under standard property insurance policies and are therefore excluded from coverage. Common exclusions include accounts, bills, currency, deeds, evidence of debt, money, and securities. These items are typically excluded because their value can be difficult to verify or because they are subject to specialized forms of insurance. In addition, bullion, manuscripts, and similar valuable property are generally not covered unless they are specifically listed or scheduled in the policy. To obtain coverage for these items, the insured may need to purchase additional insurance or have the property expressly identified in the policy.

When more than one insurance policy provides coverage for the same property and loss, the Other Insurance Condition determines how the loss will be shared among the insurers. Under this condition, the insurer typically applies a pro rata liability approach, paying only its proportionate share of the loss based on the amount of insurance it provides relative to the total insurance available on the property. This provision helps prevent duplicate recovery and ensures that each insurer contributes fairly to the settlement of the claim.