Story Case

The Western Sugar Refining Company had its plant insured with the Guaranty Insurance Company. Owing to the misconduct of striking employees of the refining company, a flue of an oven in the drying room was closed from one Saturday until Monday, resulting in the loss of all the sugar in that room. This loss, amounting to $10,000, was due to the smoke which worked through the mill. This was covered by the insurance policy and the refining company demanded payment from the insurance company. The insurance company refused to pay, on the ground that there was no fire, except the fire the company intended to have in the heating plant, and that the utmost that could be said was that the fire had done something that it was not intended it should do. Also, it was maintained that the fact that the flue was closed by striking employees was immaterial. Are these defenses good?

Ruling Court Case. American Towing Company Vs. Insurance Company, Volume 74, Maryland Reports, Page 25

A fireman working for the American Towing Company negligently let the water run out of the pipes in one of its boilers while the fire therein was still going. Because of this, the boiler was ruined. The American Towing Company brought this case to recover insurance for the loss of the boiler.

The opinion of the court: The fire did not go beyond the boiler, and, therefore, was the fire intended by the insured. This intended fire produced unintended losses, which cannot be recovered under a fire insurance policy.

Ruling Law. Story Case Answer

The distinction between a friendly and unfriendly fire is an obvious one. A friendly fire is one which may incidentally cause a loss, but was itself intended to burn. This is illustrated by the following case, Way vs. Insurance Company, Volume 166, Massachusetts Reports, Page 67: The insured set fire to a quantity of papers that he had in his stove, with the intention of destroying them. The intense heat from the papers caught fire to the soot in the chimney, damaging the inside of the chimney. This fire in the chimney was held to be a hostile fire and the loss was recoverable. In the Story Case, the fire in the oven was intended by the company; there was no further combustion elsewhere, although smoke escaped and caused damage. There can be no recovery on the policy.

Any fire set by a third person, although it may be intended by him, is as regards the insured, a hostile fire, and of course there can be recovery for damage caused thereby. Since, however, in the Story Case, the fire never became hostile, this point is not material to the case.