Property insurance principles are covered in the national Property Insurance Basics guide: perils and hazards, actual cash value and replacement cost, coinsurance and the loss conditions. This guide covers the North Dakota statutes behind those concepts:

• the standard fire policy
• insurable interest
• proximate cause
• the valued policy law
• the rules for proof of loss and binders

Insurable interest (26.1-29-04 to 26.1-29-07)

• The sole object of insurance is indemnity. If the insured has no insurable interest, the contract is void (26.1-29-05).
• For property, an insurable interest must exist when the insurance takes effect and when the loss occurs, but not in between (26.1-29-06).
• It's measured by how much the insured would be damaged by the loss (26.1-29-07).

The standard fire policy (26.1-39-06)

• Fire policies on North Dakota property must conform to the 1943 New York standard fire policy, which is filed as the state standard. This doesn't apply to inland marine, ocean marine or auto insurance.
• Policies may not limit the time to sue to less than three years.
• The standard policy is an interest policy. After a written transfer of interest, full protection continues for a five-day grace period.
• Pro rata other insurance. Each insurer pays its share in proportion to all valid insurance.
• A commercial policy with fire coverage may exclude fire caused by terrorism.
• A nonstandard form may be approved if its fire coverage is no less than the standard policy's (26.1-39-09).

Valued and open policies (26.1-30-03, 26.1-39-05)

• A valued policy states an agreed value for the property. An open policy leaves value to be determined at the time of loss.
• North Dakota's valued policy law. For a total loss of real property, the amount of insurance written in the policy is the measure of damages.
• Exceptions:
  • A loss within 60 days after the effective date, or after an insured-requested limit increase of 25% or more, pays the lesser of the policy amount or the partial-loss amount.
  • Separate structures count only if individually described with a value.
  • Personal property isn't covered by the law.
  • Builders risk is settled at the actual value of the work completed at the time of loss.

Causes of loss (26.1-32-01 to 26.1-32-05)

• The insurer is liable for a loss proximately caused by an insured peril, even if an excluded peril was a remote cause. Insurers may contract out of this efficient proximate cause rule.
• Loss caused by efforts to rescue the property from an insured peril is covered.
• The insurer isn't liable for a loss caused by the insured's willful act. It isn't excused by the negligence of the insured or others.
• A fire loss must be reported without unnecessary delay.
• Increase in risk (26.1-39-01, 26.1-39-02). The insurer may rescind if the insured, without consent, changes the property's use or condition in a way that increases the risk. A change that doesn't increase the risk has no effect.

Proof of loss and binders

• Proof-of-loss forms (26.1-32-08). The insurer furnishes forms within 20 days of notice. The insured then has 60 days to return them, or 90 days for life beneficiaries. An insurer that doesn't send the forms waives proof of loss.
• Binders (26.1-39-23):
  • They may be oral or written and include the standard fire policy terms.
  • A producer who binds coverage orally delivers a written binder within three business days if asked.
  • Lenders must accept a proper binder, but not a renewal of it.
• Policy period (26.1-30-18). Coverage starts and ends at 12:01 a.m. on the stated dates. Crop-hail insurance is the exception: it starts at the time stated on the application.

Lines of authority (26.1-26-11)

The property line covers direct and consequential loss of or damage to property of every kind.

Common exam traps

• Insurable interest in property must exist at inception and at the time of loss.
• North Dakota uses the 1943 New York standard fire policy, and suits can't be limited to less than three years.
• The valued policy law covers real property total losses only. Watch the 60-day / 25% exception.
• An insurer that fails to send proof-of-loss forms within 20 days waives proof of loss.