A recent case regarding fire damage has illustrated some important principles regarding insurance claims.

The claimant owned an aggregate processing plant near Greenwich. The defendant was a contractor carrying out hot working at the plant. There was a serious fire at the plant and a dispute arose as to whether the defendant was responsible for the fire. The defendant denied that they caused the fire but if they were wrong, they claimed that they were entitled to call on their public liability policy.

The Court held that the fire was, on balance, caused by the defendant’s work. A globule of molten metal from the defendant’s work had caused smouldering of material that led to a serious fire over an hour after the work had finished. However, it was too easy to say that as the fire was caused by the hot work the defendant must be liable, as it cannot have carried out the hot works with reasonable care. In this case the defendant had maintained a fire watch for over 30 minutes and in the circumstances that was reasonable.

The Court also noted that the defendant would not have been able to claim under its public liability insurance if it had been liable. It was in breach of one of the conditions precedent to coverage. The defendant had failed to follow the insurer’s requirements for safeguards during hot working, as not all combustible material had been “covered and protected”.

There are some important lessons to be drawn from this case:

  1. Simply because damage has been caused by a contractor, it does not necessarily follow that the contractor is liable. Accidents do happen!
  2. All precautions/procedures set out in your insurance policies must be complied with. It is not sufficient to simply act with reasonable skill and care if there are specific procedures to be followed. Coverage can be denied for such non-compliance even though compliance would not have prevented the damage.
  3. If the procedures in your insurance policy are contradictory to those set out in the contract, one of these procedures must be amended.

This article was first published in Construction News on 6 September 2012