Mr. Salim is the owner of a factory that recycles electronic waste, took fire insurance for his factory that worth RO 2.5 million. In the factory, several plasma cutters were used to break the electronic goods, which carries high fire risk. During signing of insurance contract, Mr. Salim failed to disclose the usage of plasma cutters. In addition, to reduce the burden of insurance premium, Khalid decided to cover his factory for only RO 1.5 million with the assumption that fire may not destroy the whole property. Hence, “average clause” was included to the fire insurance policy by the insurance company. One day, a major fire was reported in the factory. In the investigation, it was found that the fire was caused by the plasma cutters.
a) Do you think Saeed is eligible for Compensation? Justify. -All fire insurance policies contain “Average Clause” to discourage under insurance. Explain in
detail. c) Distinguish the right of the Insurer and Insured to cancel a fire insurance policy.
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