Wheeldon operated a waste processing plant, which produced solid recovered fuel, by removing non-combustible components from inputted waste material transported on conveyor belts. The fire was caused when a failed bearing caused a misalignment of one of the conveyor belts. This created a gap between it and a trommel (a rotating industrial sieve). Combustible materials which would otherwise have been caught by the sieve, dropped through the gap at the bottom of the conveyor and accumulating there. The friction caused by the failed bearing led to hot metal fragments dropping into the accumulated combustible material, bringing about a fire.
Wheeldon's insurers declined to indemnify it on the basis of numerous alleged breaches of condition precedent. One such condition provided that "combustible waste must be stored at least 6m from any fixed plant."
The key issues were:
- What sorts of waste were to be considered 'combustible'; and
- Whether the waste identified had been 'stored' less than 6 metres from fixed plant.
To answer those questions, the court looked at the ordinary and natural meaning of the words 'combustible' and 'stored', being guided at the same time by general principles which relate to the construction of insurance contracts:
- Underwriters are presumed to be acquainted with the practice of the trade they insure (and here they had surveyed the risk);
- Any ambiguity in the terms of the insurance will be resolved against the insurer; and
- The courts generally treat condition precedents as onerous terms, so the insurer needs to clearly spell out any such terms or the insured will not be bound to comply with them.
There were various areas where materials were within 6 metres of the fixed plant, including "trommel fines". These are materials which passed through the sieve and largely consisted of a combination of glass, stone and soils.
The experts agreed that from a scientific perspective, a combustible material is anything which burns when ignited. However, the court concluded that "combustible" should be given the meaning which would be understood by an ordinary person. So, paper or cardboard would obviously be combustible. Trommel fines do contain some combustible materials, but being formed mainly of glass, stone and soils, would not be regarded by any ordinary person as 'combustible', given the natural meaning of that word. The court made it clear that if underwriters had intended another meaning, then that should have been made clear in the policy.
There was one area where it was agreed that other combustible materials were within 6 metres of fixed plant. That area was near the seat of the fire. These materials had spilt over the conveyor belt or accumulated in the gap created by the conveyor belt misalignment. The judge considered whether this breached the requirement not to 'store' materials within 6 metres of fixed plant. He determined that the word 'store' implied a degree of permanence and a deliberate decision by the insured to designate an area to keep a particular material.
The judge took the view that combustible material was not 'stored' by the conveyor belt or in the gap created by the misalignment. There was, therefore, no breach of any of the conditions precedent.
This case is a reminder to insurers that any condition precedents should be interpreted as an ordinary person would read them. If underwriters intend to impose any particular or unusual requirements, then these need to be prescribed clearly in the draftsmanship of the policy.
It should also be noted that this case was decided outside of the Insurance Act 2015. If the Act had applied, and combustible materials had been stored too close to the fixed plant, insurers would only have been entitled to refuse indemnity if the proximity of storage increased the risk of the loss.