Following a fire, which policy provision could prevent the insured from receiving full settlement of his claim?

The average provision in an insurance policy is designed to ensure that the insured does not underinsure their property. If the insured property is valued at a certain amount but is only insured for a lesser amount, the average provision operates by reducing the claim amount in proportion to the underinsurance.

In the context of a fire loss, if the insured had a property valued at $200,000 but only insured it for $150,000, the average provision could mean that the insured will only be able to claim a percentage of their loss. For instance, if the loss amounts to $100,000, the insurer might apply the average provision, leading to a reduced settlement amount because the insured was underinsured relative to the property's actual value.

This mechanism encourages policyholders to insure their property to its full value and ensures that insurers do not have to pay out claims that exceed the level of premium received based on the declared value of the asset.