Damage by tenants and the meaning of “malicious” in a property insurance context
The claimants own shop premises which were let out to (what they describe as) “bad tenants”. These tenants failed to pay all rent due and to carry out fit out works to a satisfactory standard. Accordingly, proceedings for possession were commenced against them. The claimants allege that the tenants thereafter entered the premises and stripped out much of the contents. However, most of the fixtures and fittings which were removed were owned by the tenants.
The claimants sought to claim under their commercial combined insurance policy, issued by the defendant. The relevant policy wording covered loss or damage by “malicious persons”. There was also cover for theft, including damage to the premises, but excluding damage which does not involve “entry to or exit from that part of the building…by forcible and violent means, or actual or threatened assault”. Although entry was effected using keys, it was alleged that the exit “took place in an atmosphere in intimidation” and that the claimant’s son was assaulted by the tenants’ solicitor.
When the defendants advised that the claim was not covered, the claimants brought a complaint to the FOS. They were awarded GBP 100,000 but they did not accept that since their losses were alleged to be around GBP 200,000. The FOS award was not binding on the court.
The judge, Gerard McDermott QC, examined the meaning of “malicious” in the context of this case. He held that the use of the word in a criminal context was very different (where, in the absence of self-defence, it is difficult to see how it could not be “malicious” to, for example, wound by assault). The defendant had referred to the OED definition of malice, namely “the desire to harm someone; ill-will”. The judge concluded that “it is plain to me, and I find that, the use of the word “malicious” in this policy was intended to connote an ill intent” which would mean that there had been “no reason for the item to be damaged in the course of the tenants removing property…and it was done with some deliberation with the intention that the same be damaged”. Here, the circumstantial evidence available led to an inference that the tenants had not intended to “ransack” the premises, but instead had caused damage by removing items that they felt entitled to remove. Accordingly, much of the claim failed (and it was said that the claimants should instead pursue the tenants for failing to deliver up the premises in a proper state).
Nor was the peril of theft made out. There had been no forcible entry or exit on the facts. The alleged assault by the solicitor was described as “completely incidental” to any alleged theft. Furthermore, the assault was not by the tenants themselves and did not prove a malicious course of action. However, the judge was prepared to accept that there had been some damage attributable to malicious intent on the part of the tenants when they left the premises (e.g. toilets were smashed and this was not accidental or incidental to the removal of items of equipment). He awarded just over GBP 8,000 plus three months loss of rent whilst this particular damage was repaired (resulting in judgment of GBP 15,750 for the claimants).
COMMENT: The judge’s conclusion as to the meaning of “malicious” can be contrasted with that in Atlasnavios-Navegacao and The Grecia Express (referred to above), where the judges held that there was no need to establish ill intent – a much wider test for maliciousness than that adopted in this case.