Chapter III. Non-life Insurance
Section 1. Fire Insurance
(Liability of a Fire Insurer)
A fire insurer is liable, unless otherwise stipulated in the contract, to indemnify for damage or loss of the subject matter insured as a result of fire.
Loss to the subject matter insured that occurs in the course of attempting to save or protect it is deemed to have arisen out of the insured risk.
(Liability of an Insurance Contract Covering a Group of Things Collectively)
When insurance is effected to cover a group of things collectively, the belongings of family members, employees, or cohabitants of the insured may also be specified in the insurance contract as part of the subject matter insured, and indemnification for loss to such items shall be made upon occurrence of the insured risk.
An insurance contract referred to in the preceding paragraph shall be deemed as having also been entered into for the benefit of the third parties.
(Effect of the Insured Amount)
The insured amount is the maximum liability to be borne by the insurer during the term of insurance. Before underwriting an insurance policy, the insurer shall appraise the market value of the subject matter to be insured, and may not over-insure the subject matter.
(Subject Matter Insured / Valued and Unvalued)
A proposer may apply for either valued or unvalued insurance coverage of any given subject matter, at a premium rate and under provisions approved by the competent authority.
When the stipulated value of the subject matter insured is the insured amount, if total loss or partial loss is sustained, indemnification shall be calculated on the basis of the stipulated value.
When the value of the subject matter insured is not stipulated, if loss is sustained, indemnification shall be calculated on the basis of the actual value at the time of occurrence of the insured peril. Indemnification may not exceed the insured amount.
(Definition of Total Loss)
The term "total loss" as used in Article 73 means total destruction or loss of the subject matter insured, to such an extent that it cannot be restored, or the cost of restoration exceeds the value of the subject matter insured after restoration to its original condition.
(Stipulating the Value of the Subject Matter Insured)
If the value of the subject matter insured cannot be appraised on the basis of market value, the contracting parties may stipulate its value. Any indemnification shall be based on the stipulated value.
Where the insured amount exceeds the value of the subject matter insured, if the contract is entered into through the fraud of one of the contracting parties, the other party may rescind the contract. If loss is sustained, the other party may also claim indemnification. If no fraud is involved, the contract shall, except in the case of valued insurance, be valid only within the limits of the value of the subject matter insured.
For contracts where fraud is not at issue, after one of the contracting parties has notified the other party of the fact that the subject matter is over-insured, the insured amount and the premium shall both be reduced pro rata according to the value of the subject matter insured.
If the insured amount is below the value of the subject matter insured, the burden of the insurer, unless otherwise stipulated in the contract, is to be determined by the ratio of the insured amount to the value of the subject matter insured.
(Liability for Delayed Appraisal of Loss)
If appraisal of loss is delayed due to causes attributable to the insurer, additional interest shall accrue beginning one month from the day on which the insured presents a statement of loss. If appraisal of loss remains unfinalized two months after presentation of the statement of loss, the insured may claim pre-payment of the minimum amount of indemnification to which it is entitled.
(Assumption of the Expenses of Appraising a Loss)
Any necessary expenses incurred by an insurer or an insured to prove and appraise a loss are to be borne by the insurer unless otherwise stipulated in the contract.
If the insured amount is less than the value of the subject matter insured, the expenses mentioned in the preceding paragraph are to be borne pro rata by the insurer in accordance with the ratio set forth in Article 77.
(Prohibition of Alteration to the Insured Subject Matter)
Before appraisal of loss has been finalized, the proposer or the insured may not, except in order to ensure the public interest or avoid aggravation of loss, make any alteration to the subject matter insured without the insurer's consent.
(Termination of Contract for Complete Destruction or Loss of the Insured Subject Matter)
When something other than an insured peril specified in the insurance contract causes complete destruction or loss of the subject matter insured, the insurance contract shall be forthwith terminated.
(Termination of Contract for Partial Loss of the Insured Subject Matter)
If the subject matter insured sustains partial loss, both the insurer and the proposer have the right to terminate the contract. After termination, premium already paid for the portion not affected by the loss shall be refunded.
The right to terminate the contract as stated in the preceding paragraph shall be extinguished if not exercised within one month after indemnification is paid.
The insurer shall notify the proposer fifteen days prior to terminating the contract.
If neither the proposer nor the insurer terminates the contract, the liability of the insurer for any future loss resulting from insured perils shall, unless otherwise stipulated in the contract, be limited to the balance of the insured amount after indemnification.
(Provisions Applied Mutatis Mutandis)
The provisions of Article 73 to 81 apply mutatis mutandis to marine insurance, land and air insurance, liability insurance, bonding insurance, and other types of non-life insurance.
The provisions of Article 123 and 124 apply mutatis mutandis to non-life insurance of term length exceeding one year.