How a Temporary Visa Works Under the United States-Jordan Free Trade Agreement

The United States (U.S.) and Jordan launched negotiations for a free trade agreement in 2000. Several reasons explain the U.S. desire to negotiate a free trade agreement with Jordan. The failed WTO Ministerial Conference in 1999 led U.S. trade officials to analyze the possibilities for a free trade agreement that would include certain provisions that are resisted at the multilateral trading level. Moreover, the U.S. and Jordan had already signed a trade and investment framework in 1999, which is usually a precursor for a FTA.

The US-JO FTA includes a preamble, nineteen articles, three annexes, joint statements, memorandums of understanding, and side letters. In addition to the interesting articles on labor and environment, the US-JO FTA provides the opportunity for Jordanian nationals to come to the U.S. to make investments and participate in trade. Under certain conditions, Jordanian nationals can enter the U.S. to render professional services.

The US-JO FTA permits entry of nationals of one party in the territory of the other. From the outset, it is necessary to distinguish between migration and the ability of Jordanians to enter into the U.S. to make investments and participate in trade. Jordanian nationals are not allowed permanent resident status, but are only given the opportunity to acquire a visa on a temporary basis or "non-immigrant" status. This status requires that the visa beneficiary return to Jordan after his temporary stay expires.

The US-JO FTA allows nationals of Jordan to enter into the U.S. to carry solely "substantial trade", including trade in services and technology. The yardstick in the FTA is "substantial trade". Article 8 does not specify what constitutes "substantial trade". For example, should a Jordanian trader be major exporter to the U.S to be eligible for entry? Or the U.S is obliged, subject to its laws on entry, to allow Jordan's traders entry into its territory for attending a trade fair or partnering with U.S firms.

In effect, the language of article 8 of the US-JO FTA is drawn from the Immigration and Naturalization Service (INS), now known as Bureau of Citizenship and Immigration Service within the Department of Homeland Security, and the U.S Department of State regulations. The Department of State regulations define a treaty trader as an alien, classifiable as a nonimmigrant treaty trader (E-1), who will be in the U.S solely to carry on trade of a "substantial nature" either on the alien's behalf or as an employee of a foreign person or organization engaged in trade, "principally" between the U.S and the foreign state of which the alien is a national. This language is identical to the language of article 8.1 of the US-JO FTA. The regulations of the Department of State reads that consideration being given to any conditions in the country of which the alien is a national which may affect the alien's ability to carry on such substantial trade. Moreover, the alien must prove that he intends to depart the U.S after the termination of E-1 status.

Although US-JO FTA does not define the term "substantial trade", the Department of State regulations define it as the quantum of trade "sufficient" to ensure a continuous flow of trade items between the U.S and the treaty country. Continuous flow contemplates numerous exchanges over time rather than a single transaction, regardless of the monetary value. The U.S regulation considers monetary value as an important factor. However, greater weight is given to more numerous exchanges of larger value. Therefore, Department of State regulations do not specify an exact monetary value of substantial trade, for example $100,000, as a benchmark that would qualify a Jordanian trader as eligible for E-1 visa.

Rather, Department of State regulations leave it to the U.S Consular Office in Jordan the flexibility of determining "substantial trade" that would qualify Jordanian nationals of for E-1 visa. This conclusion is supported by the fact that the regulations of the Department of State itself read that consideration being given to any conditions in the country of which the alien is a national which may affect the alien's ability to carry on such substantial trade. In other words, the U.S Consular Office will have to take into account the conditions prevalent in Jordan when evaluating a petition for E-1 visa. Thus, the term "substantial trade will be evaluated on a case-by-case basis.

Additionally, the term "trade" is not defined in the US-JO FTA. The negotiators of the US-JO FTA perhaps wanted to give a non-exhaustive list of trade activities that could be conducted in the territory of the other party such as trade in services and technology. Other items of trade may include trade in monies, international banking, insurance, transportation, tourism, communications, and some news gathering activities.

The US-JO FTA also allows nationals of one party to enter into the territory of the other party to establish, develop, administer, or advise on the operation of an "investment". However, investment is qualified by the requirement that the nationals or the company that employs them "have committed" or "in the process of committing" a substantial amount of capital or other resources. In other words, the language of "have committed" or "in the process of committing" seems to require a significant amount of upfront investment such as transferring money before a national of Jordan can obtain the visa. The purpose such language could be interpreted so as to prevent maneuvering and fraud. Again, in the investment provision of the FTA, the yardstick is commitment to a "substantial amount of capital or other resources". The Department of State regulations define a treaty investor as an alien, classifiable as a nonimmigrant treaty investor (E-2), that has invested or is actively in the process of investing a substantial amount of capital, as distinct from a relatively small amount of capital solely for the purpose of earning a living, and he seeks entry solely to develop and direct the enterprise. Moreover, the treaty investor must intend to depart from the U.S upon the termination of E-2 status. Thus, subparagraph 8.2 of the US-JO FTA is drawn directly from the U.S regulations.

The US-JO FTA is silent as to the definition of "investment" and "substantial amount of capital". However, the Department of State regulation defines investment as the treaty investor's placing of capital, including funds and other assets, at risk in the commercial sense with the objective of generating a profit. The treaty investor must be "in possession" of and "have control" over the capital invested or being invested. Furthermore, the U.S regulations require that capital in the process of being invested must be "irrevocably" committed to the enterprise. In other words, the treaty investor must commit capital in an unalterable way or commit beyond recall.

The treaty investor must have the burden of establishing such irrevocable commitment given to the particular circumstances of each case. Moreover, according to the U.S regulations, the treaty investor may use any legal mechanism available that would not only irrevocably commit funds to the enterprise but also extend some personal liability protection to the treaty investor. Even if all other conditions are met, the investment must not be passive or virtual but rather a "real" and "active" commercial or entrepreneurial undertaking, producing some service or commodity for profit and must meet applicable legal requirements for doing business in the particular jurisdiction in the U.S. This language intends to prevent visa fraud.

As to the definition of "substantial amount of capital", article 8 of the US-JO FTA is silent on this matter. However, the U.S Department of State regulations define "substantial capital" as the amount that is 1) substantial in the proportional sense for example in relationship to the total cost of either purchasing an established enterprise or creating the type of enterprise under consideration; 2) sufficient to ensure the treaty investor's financial commitment to the successful operation of the enterprise; and 3) of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise. The U.S regulations define whether an amount of capital is substantial in the proportionality sense in terms of an inverted sliding scale. For example, the lower the total cost of the enterprise, the higher, proportionately, the investment must be to meet the criteria. Moreover, the Department of State regulations require that projected future capacity of the enterprise should generally be realizable within five years from the date the alien commences normal business activity of the enterprise. In summation, U.S regulations do not specify an exact amount of capital that would serve as a yardstick to evaluate whether an investment could qualify its holder for E-2 visa. Rather, the regulations leave "substantial amount of capital" test to be evaluated on a case-by-case basis.

Article 8.2 of the US-JO FTA allows nationals of either party to enter the territory of the other party to "establish", "develop", "administer", or "advise" of an investment. These four terms are not defined in article 8 of the US-JO FTA. Again, U.S Department of State regulations define some of these terms. For example, the regulations define "develop and direct" as what the business or individual treaty investor does or will develop and direct the enterprise by controlling the enterprise through ownership of at least 50% of the business, by possessing operational control through a managerial position or other corporate device, or by other means. Therefore, an investor under the US-JO FTA must play a key role in the investment whether through establishment, development, administration, or advice in order to be eligible for E-2 visa.

For the purpose of article 8, the U.S rendered nationals of Jordan as eligible for treaty trader (E-1) and treaty investor (E-2) visas. This article seems to imply as if the U.S gave Jordanian nationals special or privileged visa treatment. However, Jordanian national individuals will not be exempt from acquiring a visa for entry into the U.S. Rather, Jordanian national must appear at the U.S. embassy or consulate in Jordan and be inspected by a consular officer and acquire a visa stamp before entering the U.S. for inspection by an immigration officer.

Two-way trade between the U.S. and Jordan is up substantially since the free trade agreement between the two countries took effect, but a provision enabling temporary entry of Jordanian nationals into the U.S. has seen little use. For the period 2002-2010, there were no trader or investor visas issued to Jordanian nationals under the visa provisions of the FTA. This state of affair could be attributed to lack of awareness or understanding on the part of Jordan's nationals as to E category of visas, the difficulty traders or investors face in meeting the thresholds of "substantial trade" or "substantial amount of capital" for investment, or difficulty of proving intent to return back to Jordan. Not any trader or investor can meet these thresholds. The onerous of article 8 of the FTA might explain the nonexistent of visas under the FTA so far even though U.S regulations allow for consideration being given to any conditions in the country of which the alien is a national which may affect the alien's ability to carry on such substantial trade.

On the other hand, one year after NAFTA came into force, 220 accountants from the U.S, but none from Mexico, entered Canada independently, and 62 U.S accountants entered as intra-company employees, 965 engineers from the U.S and 7 from Mexico, and 224 American intra-company engineers and 3 Mexicans were issued entry documents, 34 lawyers independently and 9 as intra-company employees came from the U.S.

Although national security, outsourcing, and immigration concerns are issues that need to be addressed, the U.S. must rationally weigh the costs and benefits of limiting movement of individuals. Increasing temporary worker mobility, and for that matter trade in general, has greater potential to benefit trade development, mutual understanding, peace, and tolerance. Failure to consider movement for individuals as a vital component of economic infrastructure and foreign policy will seriously affect economic growth and stability.

US-Jordan FTA Cross-Border Provision of Services

Historically, most trade agreements focused on reducing tariffs and non-tariff barriers on goods as they cross international borders. However, the services sector now accounts for about seventy five percent of employment activity in industrialized countries like the U.S. Therefore, current trade agreements deal with trade in services.

While WTO achieved major progress in liberalizing the trade in goods, it later has begun to liberalize trade in services. The WTO's General Agreement on Trade in Services (GATS) recognizes several modes of supplying services with "Mode 4" addressing the temporary cross-border movement of business and professional workers. The US-JO FTA goes beyond the primary focus on goods and it deals with a new frontier, liberalization of trade in services. Such liberalization is important for freer flow of labor over national borders.

The US-JO FTA sets out several service obligations. The FTA requires each party to accord to service providers of another party treatment no less favorable than that it accords, in like circumstances, to its own service providers. The idea of this provision is nondiscrimination whereby Jordan must treat service provider from the U.S. the same way that Jordan treats service provider from Jordan. The other key US-JO FTA obligation is the most-favored nation obligation whereby each party is to accord to service providers of another party treatment no less favorable than that it accords, in like circumstances, to service providers of any other Party or of a non-Party. For example, if Jordan treats a service provider from Iraq more favorably than it treats a service provider from the U.S., the treatment provided to the Iraqi must be accorded to an American service provider.

The US-JO FTA created obligations specifically targeting professional services. Professional services, unlike most service providers who wish to provide their services in the U.S., they need permission to enter the jurisdiction from the U.S. immigration authorities. Movement of natural persons, professionals, is of particular importance to Jordan. However, temporary entry into the U.S. is limited to executives, managers, or specialists of a Jordanian company that has a physical presence in the U.S. in the form of branch, subsidiary, or affiliate. Such entry is limited to three years with a one-time two years extension.

The U.S. commitment, while covering the intra-corporate movement of senior personnel, does not extend to other categories of workers. Low-skilled workers seeking entry into the U.S. will not be admitted under the US-JO FTA. Both the U.S. and Jordan would benefit more from relaxed restrictions on unskilled labor rather than on skilled labor. Jordan has primarily unskilled labor to supply while the U.S. has primarily unskilled jobs to offer.

Under the US-JO FTA, a corporate employee cannot move to the U.S. unless his company already maintains commercial presence in the U.S. In other words, the FTA requires a Jordanian service providers to establish or maintain a representative office or any form of enterprise in the U.S. as a condition for the cross-border provision of a service. The "commercial presence" requirement prohibited if not stopped stop temporary movement of workers between the U.S. and Jordan. The US-JO FTA should have prohibited the parties from imposing local presence requirements on cross-border service providers.

The U.S. opted for skilled workers and commercial presence in the FTA perhaps out of concerns over education, certification, professional accreditation, and licensing in Jordan. For example, an engineer who wants to build a bridge in the U.S. is going to need two pieces of paper; in addition to a temporary visa permit, they also need to be licensed by the U.S. professional regulatory body. In order to increase worker mobility, the U.S. and Jordan could have concluded mutual recognition agreements and harmonized professional standards in certain sectors. Additionally, the U.S. and Jordan could have placed more emphasis on education and experience rather on passing exams or interviews. For example, a Jordanian engineer can obtain a temporary license to practice in the U.S. if he has a minimum of twelve years of acceptable engineering experience.

Labor Mobility in the North American Free Trade Agreement

Compared with the modest language of article 8 of the US-JO FTA, NAFTA dedicates a whole chapter-chapter 16- dedicated to temporary entry for business persons. The purpose of chapter 16 of NAFTA is to facilitate temporary entry of business persons. NAFTA parties endeavor to develop and adopt common criteria and definitions for the implementation of chapter 16. Moreover, each NAFTA party is committed to furnish the other parties with materials that enable them to be acquainted with chapter 16. To facilitate the movement of persons across the borders, each NAFTA party is committed to provide explanatory material regarding the requirements for temporary entry under chapter 16 in such a manner as will enable business persons of the other parties to become acquainted with them. On the other hand, the US-JO FTA is absent of such a commitment. Hence, Jordanian nationals might not be able to determine the meanings of critical terms such as "substantial trade" or "investment".

According to NAFTA, any dispute regarding refusal to grant temporary entry of business persons is subject to the dispute settlement mechanism. Chapter 16 of NAFTA created four categories of business persons who are citizens of a member country to be granted temporary entry. These four basic categories are: business visitors, traders and investors, intra-company transferees, and professionals. Business visitors who are engaged in international business activities may enter a NAFTA member country in B-1 status for the purposes of conducting research and design (technical, scientific, and statistical researchers), growth, manufacture and production (harvester owner supervising a harvesting crew, purchasing and production management personnel), marketing (marketing researchers and analysts, trade fair and promotional personnel).

NAFTA also provides E-1 and E-2 visas for traders and investors. The conditions for granting visa under this category are the same as visas granted under article 8 of the US-JO FTA. However, NAFTA mandates that no NAFTA party may impose or maintain any numerical restriction relating to temporary entry for traders or investors. In contrast, the U.S may impose numerical limits on the number of visa traders or investors under the US-JO FTA.

Another distinction between NAFTA and the US-JO FTA under the treaty trader and investor provisions is that a Canadian or Mexican business person may be denied E visa if there is a labor dispute in the Canadian or Mexican's occupational classification in progress where the Canadian or Mexican will be employed and their entry may adversely affect the settlement of the labor dispute or the employment of any person involved in the dispute. In other words, the requirements for E-1 and E-2 visas under NAFTA are the same as they in the US-JO FTA, with the exception that entry may be denied when it would adversely affect the settlement of a labor dispute in the US. This provision is only triggered when the Department of Labor certifies the existence of a strike or work stoppage, and does not apply to E visa holders already in the US. This language is absent from the US-JO FTA which means in effect that even if there is a labor dispute in the Jordanian's occupational classification, still a Jordanian national can enter the U.S as trader or investor.

The third category of NAFTA visas is L-1 visa for a business person employed by an enterprise who seeks to render services to that enterprise or a subsidiary or affiliate thereof, in a capacity that is managerial, executive or involves specialized knowledge. In this category, no NAFTA party may impose numerical restrictions on temporary entry.

The last category of visas under NAFTA is professional visa, TN category. This kind of visa is unique for NAFTA nationals and is not available for other nationals. The US-JO FTA does not contain such kind of visa system for professionals. Under NAFTA, certain categories of professionals who meet minimum educational requirements, or posses designated credentials or licenses and experience, and who seek to engage in professional occupations in a NAFTA member country, may be admitted for example into the U.S for up to one year. Appendix 1603.D.1 of NAFTA lists 63 professions whom its holder may be eligible for TN visa after meeting the minimum requirements. For example, an economist has to posses baccalaureate or Licenciatura degree, a lawyer has to posses LL.B (for example Canadian common law degree), J.D., LL.L., B.C.L. (for example Canadian civil law degree) or Licenciatura degree (Mexican law degree consists of studying for five years) or membership in a state/provincial bar, and a university teacher has to posses baccalaureate or Licenciatura degree.

The U.S could have incorporated a provision similar to the TN category of NAFTA in the US-JO FTA regarding professional visas. Professional visa system could have given the opportunity for Jordanian professionals to acquire contacts and experience that would be translated into increase of trade between the U.S and Jordan. However, issues of immigration and recognition of credentials could have prevented the incorporation of such a provision in the US-JO FTA. Probably, the U.S was concerned that Jordan may dump its citizens in the U.S. and they would not return to their native Jordan. Although, placing a cap on the number of TN visas issued annually could have minimized this concern on the part of the U.S.

Conclusion

Freer trade applies not only for trade in goods but also extends to include other factors of production such as labor and capital. Production is not just a function of capital and natural resources, but also of labor. Little attention has been paid to liberalizing the movement of persons who trade in these goods and services. In the formulation of trade agreement, the flow of goods between the member countries should be discussed in connection with the flow of people.

The US-JO FTA is designed to permit temporary entry, without intent to establish permanent residence, of traders and key business personnel. Despite that, the FTA does not provide "truly temporary entry". As of this date, Jordanian nationals are not able to benefit from the visa commitments of the US-JO FTA. The US-JO FTA permits entry for narrowly defined investment-related and trade-related purposes. The U.S made the entry of traders and investors from Jordan difficult. Jordanian businesspeople face difficulties in meeting the threshold of "substantial trade", "investment", and "substantial amount of capital". Moreover, the U.S. couples the movement of key business personnel with local presence requirements. Only Jordanian nationals with money and extensive professional skills can gain entry to the U.S. The US-JO FTA prioritized workers with advanced educational training and capital to invest. The US-JO FTA prioritizes the cross-border movement of corporate executives, researchers, and professionals with advanced degrees.

The US-JO FTA, among other US-Arab free trade agreement, is a trade agreement concerned with the movement of goods and services but not with the movement of persons. The U.S. has chosen to actively pursue a free trade agenda in the Middle East while simultaneously restricting inbound temporary labor mobility. Jordanian nationals are human beings and they have a baccalaureate degree. They are part of the free trade agreement. There can be no free trade without people to facilitate it. The current temporary visa provisions significantly increase the cost of doing business and prevent the effective use of a company's human resources. The issue of trade and temporary visas should be of immediate relevance to negotiators when crafting the broader US-Middle East FTA. Unless the inter-relationship between trade and temporary visas is properly understood, trade liberalization may be easily undone.

Life Time Investment - A Soft Pillow Under The Head

What does an Insurance signify? An Insurance basically means a sound and fool-proof protection for any person or individual in case of his unfortunate demise. In such a case, the immediate family members or the next of kin of the deceased are provided with a substantial financial support for the remainder part of their life in exchange of the payment of a small amount of a premium made by the Policy holder. This is subject to the condition that the payment of the premium is made regularly for a stipulated period of time till the end of the policy. However, even if the policy holder is alive and well, he stands entitled to a substantial benefit of financial security immediately after the stipulated period of the Insurance Policy is over. This is all the more beneficial considering his retirement from service when he is in dire need of financial help. This financial help comes in at the right time and is available to him throughout his life time. In fact, Insurance is in fact an integral part of solicitation.

It would be pertinent to mention here that around three and half decades ago, the only Insurance Company in India available was through the Life Insurance Corporation of India or the L.I.C., which was a Government body under the Ministry of Finance. At that time, there was hardly any competition against this organization. Various other kinds of insurance covers were provided by a few other government organizations, such as, the General Insurance Corporation, National Insurance Corporation, etc. Thus, the general public was left with hardly any other option other than to go in for a Life Insurance through the Life Insurance Corporation or other kinds of insurances through government agencies offering insurance against vehicles, home insurance and a broad spectrum of insurances.

Over the last two decades or so that have lapsed and especially during the last decade, there has been a large-scale burgeoning of a large number of companies in the Private Sector that have emerged where the sole purpose is to offer insurances to individuals and organizations keeping their client's interests in mind offering them better benefits and amenities. Today, there is a plethora of insurance companies on the horizon who offer much more than the earlier companies could provide.

In today's scenario, Insurances are generally categorized under various heads:

Life Insurance

Vehicle Insurance

Medical Insurance

Home Insurance

Overseas Medical Insurance

Students Insurance

Accidental Insurance

These varied insurances offer a full-fledged cover to the individual or organizations against any unprecedented risks of losses or of lives. A large number of these insurance companies are struggling in an attempt to out-beat each other so that they attract a larger number of customers in their fold. The cut-throat competition amongst these private sector companies is so intense that each one of them is all out to throttle each other out of existence. These companies have also given rise to an equally large number of insurance brokers whose sale pitch and peripheral activities provide the individuals or companies with maximum bargains. The buyer of these insurance policies has a wide range of choices from where he can opt for a better bargain that would stand to their benefit.

Life Insurance is one of the most popular insurances of its kind. These insurances sell like hot cakes especially for individuals. The risk covers that these insurances provide to the policy holder are not only manifold but are beneficial in the long run. A Life Insurance is most beneficial for a person when he is in his youth and working, since when an insurance policy is taken up at an early stage, the risk cover is far longer and the maturity amount of the policy is high whereas the amount of premium is not only affordable, but is pretty low. Actually, even when though the amount of premium is rather low, the policy holder feels the pinch, but this discomfort is eliminated when towards the end of the policy period, the maturity amount covers it all.

There are however policies where a percentile part of the amount is refunded back to the policy holder at regular intervals which is the Money-back policy. Even this partial amount when received at regular intervals serves in good stead to the policy holder. Insurance companies offer a retirement cum pension policy where a person pays regularly his premium and towards the end of the term of the policy starts receiving a fixed amount of pension which holds good and provides financial support in his old age.

These days one of the most popular and in demand are the cash-less policies especially for hospitalization and vehicles.

A Vehicle Insurance is one of the primary requirements which a person must carry while purchasing a vehicle. It is extremely necessary taking into account, the enormously large number of fatal road accidents taking place in the dense traffic and the unavoidable damage caused to vehicles in the wake of these accidents.

The insurance cover for your vehicle after insurance includes the vehicle, the person who is driving as well as the person who has met with the accident with your vehicle. The entire cost for the damages is paid for by the Insurance company and therefore the policy holder does not undergo any loss of money. The repairs these days are exorbitant and prohibitive and to get a damaged vehicles involves a fortune. Under the cashless policy, a damaged vehicle can easily be repaired without the owner having to shed any cash rather the repair activity is taken care of by the insurance company. In fact, there are a large number of law enforcing that impose penalties and ensure that the person driving a vehicle mandatory goes in for a vehicle insurance. Besides, there are a large number of automobile dealer agencies that insist that vehicles be driven out of their showrooms only after they have been appropriately insured through an Insurance Company and therefore provide insurance covers on vehicles themselves.

Medical Insurance comprises of a full comprehensive cover for the individual as well as families against all unexpected illnesses or aggravation of diseases, especially where a person is required to be admitted to a hospital. With the escalation of cost of medical treatment and the consequences of a person going totally bankrupt, it is ideal that one goes in for a medical insurance without any second thought. In fact, these days there are a large number of companies both in the government sector as well in the private sector that offer cash-less insurance policies. One needs only to produce his identity proof and he would be admitted in the hospital as per the insurer's list and the treatment is started immediately without any amount to be paid by the insured person. It is the insurance company that takes care of the medical expenses of the patient. It would be pertinent to mention that a large number of companies in the private sector have also taken up hospitalization insurances for its employees. In such cases, the front-ending is done by the company and pays a consolidated premium to the insurance company after deducting a very nominal amount from their employees. These are tailor-made policies between the insurance companies and the private sector company. A floater type of medical scheme specially caters to the entire family of the employee though there may be some increase in the premium, but that is beneficial in the long run.

The House-holder policy is one of the major policies that a person is required to go in for. There is hardly any doubt that with the increasing cases of fire and arson as well as burglaries, it is imperative that one should go in for an insurance cover for the house, which is well-known as house-hold insurance policy. There is hardly any human control on natural calamities that may come upon all of a sudden and render casualties and irreparable losses. Under these circumstances it is always preferable to have a house-hold policy. In exchange of a small amount which is payable annually, you can get your house insured against all accidents, natural calamities as well as human actions.

Overseas Medical Insurance is an insurance cover where the traveller takes up this policy before leaving for abroad. The exorbitant and prohibitive cost of medical treatment in any foreign country can be totally devastating. The Overseas Medical insurance takes care of all your medical expenses for treatment whether the illness is major or minor. This kind of insurance, though normally taken up for a stipulated period of the stay of the traveller abroad can be extended before the expiry period of insurance. For a relatively small amount of premium, the coverage amount can be very high comparable to the anticipated expenses of the treatment abroad.

The Students Policy also takes care of the expenses of the student for pursuing further studies either in the country or in a foreign country. The parents of the child require to contribute a small amount of premium on a periodic basis and when the child comes to an age where large sums of money are required to be paid for higher studies.

The Accidental Insurance is of the utmost importance. With the phenomenal increase in traffic accidents taking place, this kind of insurance comes in very handy. This is especially so where the injuries sustained by those travelling in the vehicle are serious and need intensive care. For this kind of treatment, the costs are prohibitive and beyond an average person's means, no matter how much he may be earning. This insurance covers of not only the cost of the treatment in the hospital, but post hospitalization expenses.

There has been a sudden spurt of activity in the Insurance sector in the country over the past few years now. With a gamut of insurance policies available on the platter in this country of all types, it is not only mandatory, but also imperative that these be taken up to avoid unnecessary risks and costs leading to irreparable losses. Would it not be better to rest peacefully under the soft cushion of these policies and forget worrying about the future.

Fire Insurance Under Indian Insurance Law

A contract of Insurance comes into being when a person seeking insurance protection enters into a contract with the insurer to indemnify him against loss of property by or incidental to fire and or lightening, explosion, etc. This is primarily a contract and hence as is governed by the general law of contract. However, it has certain special features as insurance transactions, such as utmost faith, insurable interest, indemnity, subrogation and contribution, etc. these principles are common in all insurance contracts and are governed by special principles of law.

FIRE INSURANCE:

According to S. 2(6A), "fire insurance business" means the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence, customarily included among the risks insured against in fire insurance business.

According to Halsbury, it is a contract of insurance by which the insurer agrees for consideration to indemnify the assured up to a certain extent and subject to certain terms and conditions against loss or damage by fire, which may happen to the property of the assured during a specific period.

Thus, fire insurance is a contract whereby the person, seeking insurance protection, enters into a contract with the insurer to indemnify him against loss of property by or incidental to fire or lightning, explosion etc. This policy is designed to insure one's property and other items from loss occurring due to complete or partial damage by fire.

In its strict sense, a fire insurance contract is one:

1. Whose principle object is insurance against loss or damage occasioned by fire.

2. The extent of insurer's liability being limited by the sum assured and not necessarily by the extent of loss or damage sustained by the insured: and

3. The insurer having no interest in the safety or destruction of the insured property apart from the liability undertaken under the contract.

LAW GOVERNING FIRE INSURANCE

There is no statutory enactment governing fire insurance, as in the case of marine insurance which is regulated by the Indian Marine Insurance Act, 1963. the Indian Insurance Act, 1938 mainly dealt with regulation of insurance business as such and not with any general or special principles of the law relating fire of other insurance contracts. So also the General Insurance Business (Nationalization) Act, 1872. in the absence of any legislative enactment on the subject , the courts in India have in dealing with the topic of fire insurance have relied so far on judicial decisions of Courts and opinions of English Jurists.

In determining the value of property damaged or destroyed by fire for the purpose of indemnity under a policy of fire insurance, it was the value of the property to the insured, which was to be measured. Prima facie that value was measured by reference of the market value of the property before and after the loss. However such method of assessment was not applicable in cases where the market value did not represent the real value of the property to the insured, as where the property was used by the insured as a home or, for carrying business. In such cases, the measure of indemnity was the cost of reinstatement. In the case of Lucas v. New Zealand Insurance Co. Ltd.[1] where the insured property was purchased and held as an income-producing investment, and therefore the court held that the proper measure of indemnity for damage to the property by fire was the cost of reinstatement.

INSURABLE INTEREST

A person who is so interested in a property as to have benefit from its existence and prejudice by its destruction is said to have insurable interest in that property. Such a person can insure the property against fire.

The interest in the property must exist both at the inception as well as at the time of loss. If it does not exist at the commencement of the contract it cannot be the subject-matter of the insurance and if it does not exist at the time of the loss, he suffers no loss and needs no indemnity. Thus, where he sells the insured property and it is damaged by fire thereafter, he suffers no loss.

RISKS COVERED UNDER FIRE INSURANCE POLICY

The date of conclusion of a contract of insurance is issuance of the policy is different from the acceptance or assumption of risk. Section 64-VB only lays down broadly that the insurer cannot assume risk prior to the date of receipt of premium. Rule 58 of the Insurance Rules, 1939 speaks about advance payment of premiums in view of sub section (!) of Section 64 VB which enables the insurer to assume the risk from the date onwards. If the proposer did not desire a particular date, it was possible for the proposer to negotiate with insurer about that term. Precisely, therefore the Apex Court has said that final acceptance is that of the assured or the insurer depends simply on the way in which negotiations for insurance have progressed. Though the following are risks which seem to have covered Fire Insurance Policy but are not totally covered under the Policy. Some of contentious areas are as follows:

FIRE: Destruction or damage to the property insured by its own fermentation, natural heating or spontaneous combustion or its undergoing any heating or drying process cannot be treated as damage due to fire. For e.g., paints or chemicals in a factory undergoing heat treatment and consequently damaged by fire is not covered. Further, burning of property insured by order of any Public Authority is excluded from the scope of cover.

LIGHTNING : Lightning may result in fire damage or other types of damage, such as a roof broken by a falling chimney struck by lightning or cracks in a building due to a lightning strike. Both fire and other types of damages caused by lightning are covered by the policy.

AIRCRAFT DAMAGE: The loss or damage to property (by fire or otherwise) directly caused by aircraft and other aerial devices and/ or articles dropped there from is covered. However, destruction or damage resulting from pressure waves caused by aircraft traveling at supersonic speed is excluded from the scope of the policy.

RIOTS, STRIKES, MALICIOUS AND TERRORISM DAMAGES: The act of any person taking part along with others in any disturbance of public peace (other than war, invasion, mutiny, civil commotion etc.) is construed to be a riot, strike or a terrorist activity. Unlawful action would not be covered under the policy.

STORM, CYCLONE, TYPHOON, TEMPEST, HURRICANE, TORNADO, FLOOD and INUNDATION: Storm, Cyclone, Typhoon, Tempest, Tornado and Hurricane are all various types of violent natural disturbances that are accompanied by thunder or strong winds or heavy rainfall. Flood or Inundation occurs when the water rises to an abnormal level. Flood or inundation should not only be understood in the common sense of the terms, i.e., flood in river or lakes, but also accumulation of water due to choked drains would be deemed to be flood.

IMPACT DAMAGE: Impact by any Rail/ Road vehicle or animal by direct contact with the insured property is covered. However, such vehicles or animals should not belong to or owned by the insured or any occupier of the premises or their employees while acting in the course of their employment.

SUBSIDENCE AND LANDSLIDE INCULUDING ROCKSIDE: Destruction or damage caused by Subsidence of part of the site on which the property stands or Landslide/ Rockslide is covered. While Subsidence means sinking of land or building to a lower level, Landslide means sliding down of land usually on a hill.

However, normal cracking, settlement or bedding down of new structures; settlement or movement of made up ground; coastal or river erosion; defective design or workmanship or use of defective materials; and demolition, construction, structural alterations or repair of any property or ground-works or excavations, are not covered.

BURSTING AND/OR OVERFLOWING OF WATER TANKS, APPARATUS AND PIPES: Loss or damage to property by water or otherwise on account of bursting or accidental overflowing of water tanks, apparatus and pipes is covered.

MISSILE TESTING OPERATIONS: Destruction or damage, due to impact or otherwise from trajectory/ projectiles in connection with missile testing operations by the Insured or anyone else, is covered.

LEAKAGE FROM AUTOMATIC SPRINKLER INSTALLATIONS: Damage, caused by water accidentally discharged or leaked out from automatic sprinkler installations in the insured's premises, is covered. However, such destruction or damage caused by repairs or alterations to the buildings or premises; repairs removal or extension of the sprinkler installation; and defects in construction known to the insured, are not covered.

BUSH FIRE: This covers damage caused by burning, whether accidental or otherwise, of bush and jungles and the clearing of lands by fire, but excludes destruction or damage, caused by Forest Fire.

RISKS NOT COVERED BY FIRE INSURANCE POLICY

Claims not maintainable/ covered under this policy are as follows:

o Theft during or after the occurrence of any insured risks

o War or nuclear perils

o Electrical breakdowns

o Ordered burning by a public authority

o Subterranean fire

o Loss or damage to bullion, precious stones, curios (value more than Rs.10000), plans, drawings, money, securities, cheque books, computer records except if they are categorically included.

o Loss or damage to property moved to a different location (except machinery and equipment for cleaning, repairs or renovation for more than 60 days).

CHARACTERICTICS OF FIRE INSURANCE CONTRACT

A fire insurance contract has the following characteristics namely:

(a) Fire insurance is a personal contract

A fire insurance contract does not ensure the safety of the insured property. Its purpose is to see that the insured does not suffer loss by reason of his interest in the insured property. Hence, if his connection with the insured property ceases by being transferred to another person, the contract of insurance also comes to an end. It is not so connected with the subject matter of the insurance as to pass automatically to the new owner to whom the subject is transferred. The contract of fire insurance is thus a mere a personal contract between the insured and the insurer for the payment of money. It can be validly assigned to another only with the consent of the insurer.

(b) It is entire and indivisible contract.

Where the insurance is of a binding and its contents of stock and machinery, the contract is expressly agreed to be divisible. Thus , where the insured is guilty of breach of duty towards the insurer in respect of one subject matters covered by the policy , the insurer can avoid the contract as a whole and not only in respect of that particular subject mater , unless the right is restricted by the terms of the policy.

(c) Cause of fire is immaterial

In insuring against fire, the insured wishes to protect him from any loss or detriment which he may suffer upon the occurrence of a fire, however it may be caused. So long as the loss is due to fire within the meaning of the policy, it is immaterial what the cause of fire is, generally. Thus , whether it was because the fire was lighted improperly or was lighted properly but negligently attended to thereafter or whether the fire was caused on account of the negligence of the insured or his servants or strangers is immaterial and the insurer is liable to indemnify the insured. In the absence of fraud, the proximate cause of the loss only is to be looked to.

The cause of the fire however becomes material to be investigated

(1). Where the fire is occasioned not by the negligence of, but by the willful

(2) Where the fire is due is to cause falling with the exception in the contract.

LIMITATION OF TIME

Indemnity insurance was an agreement by the insurer to confer on the insured a contractual right, which prima facie, came into existence immediately when the loss was suffered by the happening of an event insured against, to be put by the insurer into the same position in which the accused would have had the event not occurred but in no better position. There was a primary liability, i.e. to indemnify, and a secondary liability i.e. to put the insured in his pre-loss position, either by paying him a specifying amount or it might be in some other manner. But the fact that the insurer had an option as to the way in which he would put the insured into pre-loss position did not mean that he was not liable to indemnify him in one way or another, immediately the loss occurred. The primary liability arises on the happening of the event insured against. So, the time ran from the date of the loss and not from the date on which the policy was avoided and any suit filed after that time limit would be barred by limitation.[2]

WHO MAY INSURE AGAINST FIRE?

Only those who have insurable interest in a property can take fire insurance thereon. The following are among the class of persons who have been held to possess insurable interest in, property and can insure such property:

1. Owners of property, whether sole, or joint owner, or partner in the firm owning the property. It is not necessary that they should possession also. Thus a lesser and a lessee can both insure it jointly or severely.

2. The vender and purchaser have both rights to insure. The vendor's interest continues until the conveyance is completed and even thereafter, if he has an unpaid vendor's lien over it.

3. The mortgagor and mortgagee have both distinct interests in the mortgaged property and can insure, per Lord Esher M.R."The mortgagee does not claim his interest through the mortgagor , but by virtue of the mortgage which has given him an interest distinct from that of the mortgagor"[3]

4. Trustees are legal owners and beneficiaries the beneficial owners of trust property and each can insure it.

5. Bailees such as carriers, pawnbrokers or warehouse men are responsible for there safety of the property entrusted to them and so can insure it.

PERSON NOT ENTITLED TO INSURE

One who has no insurable interest in a property cannot insure it. For example:

1. An unsecured creditor cannot insure his debtor's property, because his right is only against the debtor personally. He can, however, insure the debtor's life.

2. A shareholder in a company cannot insure the property of the company as he has no insurable interest in any asset of the company even if he is the sole shareholder. As was the case of Macaura v. Northen Assurance Co.[4] Macaura. Because neither as a simple creditor nor as a shareholder had he any insurable interest in it.

CONCEPT OF UTMOST FAITH

As all contracts of insurance are contracts of utmost good faith, the proposer for fire insurance is also under a positive duty to make a full disclosure of all material facts and not to make any misrepresentations or misdescreptions thereof during the negotiations for obtaining the policy. This duty of utmost good faith applies equally to the insurer and the insured. There must be complete good faith on the part of the assured. This duty to observe utmost good faith is ensured b requiring the proposer to declare that the statements in the proposal form are true, that they shall be the basis of the contract and that any incorrect or false statement therein shall avoid the policy. The insurer can then rely on them to assess the risk and to fix appropriate premium and accept the risk or decline it.

The questions in the proposal form for a fire policy are so framed as to get all information which is material to the insurer to know in order to assess the risk and fix the premium, that is, all material facts. Thus the proposer is required too give information relating to:

o The proposer's name and address and occupation

o The description of the subject matter to be insured sufficient for the purpose of identifying it including,

o A description of the locality where it is situated

o How the property is being used, whether for any manufacturing purpose or hazardous trade.etc

o Whether it has already been insured

o And also ant personal insurance history including the claims if any made buy the proposer, etc.

Apart from questions in the proposal form, the proposer should disclose whether questioned or not-

1. Any information which would indicate the risk of fire to be above normal;

2. Any fact which would indicate that the insurer's liability may be more than normal can be expected such as existence of valuable manuscripts or documents, etc, and

3. Any information bearing upon the more; hazard involved.

The proposer is not obliged to disclose-

1. Information which the insurer may be presumed to know in the ordinary course of his business as an insurer;

2. Facts which tend to show that the risk is lesser than otherwise;

3. Facts as to which information is waived by the insurer; and

4. Facts which need not disclosed in view of a policy condition.

Thus, assured is under a solemn obligation to make full disclosure of material facts which may be relevant for the insurer to take into account while deciding whether the proposal should be accepted or not. While making a disclosure of the relevant facts, the

DOCTRINE OF PROXIMATE CAUSE

Where more perils than one act simultaneously or successively, it will be difficult to assess the relative effect of each peril or pick out one of these as the actual cause of the loss. In such cases, the doctrine of proximate cause helps to determine the actual cause of the loss.

Proximate cause was defined in Pawsey v. Scottish Union and National Ins. Co.,[5]as "the active, effective cause that sets in motion a train of events which brings about a result without the intervention of any force started and working actively from a new and independent source." It is dominant and effective cause even though it is not the nearest in time. It is therefore necessary when a loss occurs to investigate and ascertain what is the proximate cause of the loss in order to determine whether the insurer is liable for the loss.

PROXIMATE CAUSE OF DAMAGE

A fire policy covers risks where damage is caused by way of fire. The fire may be caused by lightening, by explosion or implosion. It may be result of riot, strike or on account of any, malicious act. However these factors must ultimately lead to a fire and the fire must be the proximate cause of damage. Therefore, a loss caused by theft of property by militants would not be covered by the fire policy. The view that the loss was covered under the malicious act clause and therefore .the insurer was liable to meet the claim is untenable, because unless and until fire is the proximate cause f damage, no claim under a fire policy would be maintainable.[6]

PROCEDURE FOR TAKING A FIRE INSURANCE POLICY

The steps involved for taking a fire insurance policy are mentioned below:

1. Selection of the Insurance Company:

There are many companies that offer fire insurance against unforeseen events. The individual or the company must take care in the selection of an insurance company. The judgment should rest on factors like goodwill, and long term standing in the market. The insurance companies can either be approached directly or through agents, some of them who are appointed by the company itself.

2. Submission of the Proposal Form:

The individual or the business owner must submit a completed prescribed proposal form with the necessary details to the insurance company for proper consideration and subsequent approval. The information in the Proposal Form should be given in good faith and must be accompanied by documents that verify the actual worth of the property or goods that are to be insured. Most of the companies have their own personalized Proposal Forms wherein the exact information has to be provided.

3. Survey of the Property/ Consideration:

Once the duly filled Proposal Form is submitted to the insurance company, it makes an "on the spot" survey of the property or the goods that are the subject matter of the insurance. This is usually done by the investigators, or the surveyors, who are appointed by the company and they need to report back to them after a thorough research and survey. This is imperative to assess the risk involved and calculate the rate of premium.

4. Acceptance of the Proposal:

Once the detailed and comprehensive report is submitted to the insurance company by the surveyors and related officers, the former makes a thorough perusal of the Proposal Form and the report. If the company is satisfied that their is no lacuna or foul play or fraud involved, it formally "accepts" the Proposal Form and directs the insured to pay the first premium to the company. It is to be noted that the insurance policy commences after the payment and the acceptance of the premium by the insured and the company, respectively. The Insurance Company issues a Cover Note after the acceptance of the first premium.

PROCEDURE ON RECEIPT OF NOTICE OF LOSS

On receipt of the notice of loss, the insurer requires the insured to furnish details pertaining to the loss in a claim from relating to the following information-

1. Circumstances and cause of the fire;

2. Occupancy and situation of the premises in which the fire occurred;

3. Insured's interest in the insured property; that is capacity in which the insured claims and whether any others are interested in the property;

4. Other insurances on the property;

5. Value of each item of the property at the time of loss together with proofs thereof , and value of the salvage ,if any; and

6. Amount claimed

Furnishing such information relating to the claim is also a condition precedent to the liability of the insurer. The above information will enable the insurer to verify whether-

(1) The policy is in force;

(2) The peril causing the loss is an insured peril;

(3) The property damaged or lost is the insured property.

Rules for calculation of value of property

The value of the insured property is-

1) Its value at the time of loss, and

2) At the place of loss, and

3) Its real or intrinsic value without any regard for its sentimental vale. Loss of prospective profit or other consequential loss is not to be taken into account.

FILING OF CLAIMS

How a claim arises?

After a contract of fire insurance has come into existence, a claim may arise by the operation of one or more insured perils on an unsecured property. There may in addition one or more uninsured perils also operating simultaneously or in succession of the property. In order that the claim should be valid the following conditions must be fulfilled:

1. The occurrence should take place due to the operation of an insured peril or where both insured and other perils operated , the dominant or efficient cause of the loss must have been an insured peril;

2. The operation of the peril must not come within the scope of the policy exceptions;

3. The event must have caused loss or damage of the insured property;

4. The occurrence must be during the currency of the policy;

5. The insured must have fulfilled all the policy conditions and should also comply with requirements to be fulfilled after the claim had arisen.

MATERIAL FACTS IN FIRE INSURANCE: PREVIOUS CONVICTION OF THE ACCUSED

The criminal record of an assured could affect the moral hazard, which insurers had to assess, and the non-disclosure of a serious criminal offence like robbery by the plaintiff would a material non-disclosure.

INSURED'S DUTY ON OUTBREAK OF FIRE, IMPLIED DUTY

On the outbreak of a fire the insured is under an implied duty to observe good faith towards the insurers and the in pursuance of it the insured must do his best to avert or minimize the loss. For this purpose he must (1) take all reasonable measures to put out the fire or prevent its spread, and (2) assist the fire brigade and others in their attempts to do so at any rate not come in their way.

With this object the insured property may be removed to a place of safety. Any loss or damage the insured property may sustain in the course of attempts to combat the fire or during its removal to a place of safety etc., will be deemed to be loss proximately caused by the fire.

If the insured fails in his duty willfully and thereby increases the burden of the insurer, the insured will be deprived of his right to revive any indemnity under the policy.[7]

INSURER'S RIGHTS ON THE OUTBREAK OF FIRE

(A) Implied Rights

Corresponding to the insured's duties the insurers have rights by the law, in view of the liability they have undertaken to indemnify the insured. Thus the insurers have a right to-

o Take reasonable measures to extinguish the fire and to minimize the loss to property, and

o For that purpose, to enter upon and take possession of the property.

The insurers will be liable to make good all the damage the property may sustain during the steps taken to put out the fire and as long as it in their possession, because all that is considered the natural and direct consequence of the fire; it has therefore been held in the case of Ahmedbhoy Habibhoy v. Bombay Fire Marine Ins. Co [8] that the extent of the damage flowing from the insured peril must be assessed when the insurer gives back and not as at the time when the peril ceased.

(B) Loss caused by steps taken to avert the risk

Damage sustained due to action taken to avoid an insured risk was not a consequence of that risk and was not recoverable unless the insured risk had begun to operate. In the case of Liverpool and London and Globe Insurance Co. Ltd v. Canadian General Electric Co. Ltd., [9] the Canadian Supreme Court held that "the loss was caused by the fire fighters' mistaken belief that their action was necessary to avert an explosion , and the loss was not recoverable under the insurance policy, which covered only damage caused by fire explosion., and the loss was not recoverable under the insurance policy, which covered only damage caused by fire or explosion."

(C) Express rights

Condition 5- in order to protect their rights well insurers have prescribed for better rights expressly in this condition according to which on the happening of any destruction or damage the insurer and every person authorized by the insurer may enter, take or keep possession of the building or premises where the damage has happened or require it to be delivered to them and deal with it for all reasonable purposes like examining, arranging, removing or sell or dispose off the same for the account of whom it may concern.

When and how a claim is made?

In the event of a fire loss covered under the fire insurance policy, the Insured shall immediately give notice thereof to the insurance company. Within 15 days of the occurrence of such loss, the Insured should submit a claim in writing, giving the details of damages and their estimated values. Details of other insurances on the same property should also be declared.

The Insured should procure and produce, at his own expense, any document like plans, account books, investigation reports etc. on demand by the insurance company.

HOW INSURANCE MAY CEASE?

Insurance under a fire policy may cease in any of the following circumstances, namely:

(1) Insurer avoiding the policy by reason of the insured making misrepresentation, misdescription or non-disclosure of any material particular;

(2) If there is a fall or displacement of any insured building range or structure or part thereof , then on the expiry of seven days wherefrom, except where the fall or displacement was due to the action of any insured peril; notwithstanding this, the insurance may be revived on revised terms if express notice is given to the company as soon as the occurrence takes place;

(3) The insurance may be terminated at any tie at the request of the insured and at the option of the company on 15 days notice to the insured

CONCLUSION

Tangible property is exposed to numerous risks like fire, floods, explosions, earthquake, riot and war, etc. and insurance protection can be had against most of these risks severally or in combination. The form in which the cover is expressed is numerous and varied. Fire insurance in its strict sense is concerned with giving protection against fire and fire only. So while granting a fire insurance policy all the requisites need be fulfilled. The insured are under a moral and legal obligation to be at utmost good faith and should be telling true facts and not just fake grounds only with the greed to recover money. Further all insurance policies help in the development of a Developing nation. Hence insurance companies have a burden to help the insured when the insured are in trouble.

REFERENCE:

1. (1983) VR 698 (Supreme Court of Vienna)

2. Callaghan v. Dominion Insurance Co. Ltd. (1997) 2 Lloyd's Rep. 541 (QBD)

3. Small v. U.K Marine Insurance Association (1897) 2 QB 311

4. (1925) AC 619

5. (1907) Case.

6. National Insurance Company v. Ashok Kumar Barariio

7. Devlin v. Queen Insurance Co, (1882) 46 UCR 611.

8. (1912) 40 IA 10 PC

9. (1981) 123 DLR (3d) 513 (Supreme Court of Canada)

Books Referred:

1. The Economics of Fire Protection by Ganapathy Ramachandran

2. Modern Insurance Law, by John Birds

3. The Handbook of Insurance Regulatory and Development Authority Act and Regulations with Allied Laws ,by Nagar