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Home / Insurance / The first standard fire policy – did it contain an arbitration clause rather than an assessment clause? | Property Insurance Law Team Blog

The first standard fire policy – did it contain an arbitration clause rather than an assessment clause? | Property Insurance Law Team Blog

The first standard fire insurance was commissioned by Massachusetts in 1873.1 For those who are interested in the older standard insurances, Rough notes published a book that briefly discussed the early history of ordinary fire insurance called The standard brand policy.2

I have researched older insurance literature and cases and tried to find the first reference to an actual valuation clause. This is the result of comments on my post, Will arbitration be the new assessment?:

I agree that a million cases and modern commentators say what the benefits are of assessing.

But where did the clause first come into use? What did it say in the insurance literature of that time why it was included? These are the sources I am looking for rather than people̵

7;s opinions.

For example, why did the insurance industry make an all risk policy for personal insurance? You and others can guess the cause. Or you can go back to the actual source material that can be found to explain why.

So, when you say that the clause was first introduced in politics to … … what is your basis for saying that? What did you read to learn why the clause was placed in real estate policies?

I have reached out to Bob Norton and Jonathan Wilkofsky, who have largely taught and written about assessment clauses. Bob has sent me a picture that refers to a case from the middle of the 18th century that we are trying to find. Older marine insurance cases and some policies discuss “valuation”, but that was the process of determining the value of a ship after arrest. That valuation process is not the modern property insurance valuation but is more akin to valuing properties. Marine valuation is still used today and is discussed in admiralty matters.

When studying the first standard fire insurance, the clause was an arbitration award that determined all the rights under the insurance contract and did not limit the panel to only determine the value of the loss:

In the event of a dispute over the rights of the parties under this insurance, the subject matter shall be referred to three uninterested men, the company and the insured choosing one of five persons to be named by the other, and the third to be chosen by the two so chosen, and the decision by a majority of the said judges shall be final and binding on the parties.

The first New York Standard Fire Insurance Policy did not have this language. Instead, it contained the valuation clause, which is close to the modern valuation clause format. I wish I could find a discussion of why New York adopted its language rather than the more expansive language of arbitration found in the Massachusetts form.

Note that the language in the old Massachusetts form uses the word “judge.” Today, Massachusetts has a unique process known as “reference,” which is controlled by law. We discussed this process in Evaluation in Massachusetts is a “reference” process.

Although my note that arbitration could be the new assessment generated a lot of questions from readers, it is important to note that historically there was an arbitration in the first standard fire policy about 150 years ago. The idea of ​​resolving disputes in the insurance through arbitration is not new.

Today’s thoughts

Research is to see what everyone else has seen, and to think what no one else has thought.
—Albert Szent-Gyorgyi
1 Commonwealth of Massachusetts, House No. 277, A law to establish a standard form of insurance. April 4, 1873.
The standard fire insurance. Joseph B. Wood (revised by). Rough notes. 1930.

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