UK: Breach Of Warranty: The Insurer's Burden Of Proof

Last Updated: 16 May 2012
Article by Martin Fox and Jennifer Smith

Background / Facts

The claimant owned an aggregate processing plant on the Thames, near Greenwich.  A serious fire broke out at the plant in February 2008.  The claimant alleged that the fire was caused by hot works carried out by the defendant.  The claimant contended that the hot works carried out by the defendant led to hot material falling into the underpan (a type of hopper or chute) situated under the sorting screens within the screening house, setting fire to its lining and ultimately the plant.  The defendant denied that they had caused the fire and alleged it was caused by hot works being carried out in an adjacent building under the supervision of the claimant.  However, in the alternative, if they were found liable, the defendant claimed an indemnity from its public liability insurers, Novae Syndicates Limited, which had been joined as a Part 20 defendant ("the insurers").  The insurers denied liability on the grounds that the defendant was in breach of warranty contained in its PL policy by failing to adequately protect and cover combustible materials in the vicinity of the hot works.

Decision

The Court found that the cause of the fire was the ignition of the lining of the underpan by a globule of molten steel, originating from the hot works undertaken by the defendant.  However, the court dismissed the claim as, on the facts, the defendant had acted reasonably and taken the necessary precautions by maintaining a fire watch for 75 minutes after the completion of the hot works.  The sequence of events that caused the fire had not been reasonably foreseeable and so the defendants were not in breach of contract or any tortious duty of care owed to the claimant.

Although the court found the defendant not liable for the fire, it went on to consider the question of liability of the PL insurers to indemnify the defendant under the insurance policy.

It was not disputed that the "Burning and Welding Warranty" contained within the policy was a condition precedent.  Paragraph 2 of the warranty required that:

"the area in the immediate vicinity of the work shall be cleared of all movable combustible material.  The combustible materials which cannot be moved ... must be covered and protected by over-lapping sheets or screens or non-combustible material."

Paragraph 3 of the warranty required that:

"a fire safety check of the working area to check for smoke, smouldering or flames ... shall be made at regular intervals during work and between 30 and 60 minutes after completion of each period of work".

The Court found that, in relation to paragraph 2, the lining of the underpan was required to be covered and protected by non-combustible material.  These two requirements are "cumulative".  The Court assumed that water sprayed onto the lining during the course of the works qualified as a non-combustible material for the purposes of the warranty and its use would satisfy the warranty.  However, despite the spraying of water, the fire was in fact caused by hot molten material landing on the lining and as a matter of fact, the use of water failed to both "cover" and "protect" the combustible lining.  While water might have been adequate in theory, in practice, on this occasion, the water was insufficient to prevent the lining igniting.  Accordingly, the Court found that the defendant was in breach of warranty and its claim for an indemnity from the insurers would have failed.

In assessing whether the defendant had complied with paragraph 3 of the warranty (the fire watch), the Court confirmed that the burden of proving a breach of warranty lies firmly with the insurers.  As the insurers had produced no evidence that supported an allegation of breach of warranty in relation to the fire watch, no finding of breach of warranty in this regard could be established.

In summary, if the defendant had been found liable, their claim for an indemnity from the PL insurers would have failed due to their insufficient attempt to cover and protect the lining of the underpan with water, in breach of the "Burning and Welding Warranty" in the policy.

Comment

The case serves as a reminder to insurers that the burden of proving a breach of warranty lies firmly with the insurer.  This should be born in mind from the outset of any investigation into a claim.  The breach of warranty in relation to covering and protecting was established as a breach on the facts of the case, as merely covering the underpan lining with water was insufficient to discharge the relatively standard warranty.  However, the PL insurers did not go far enough during their initial investigation in order to be able to prove that there was a breach of warranty in relation to the fire watch.

Parties to the action: United Marine Aggregates Limited v (1) G.M. Welding & Engineering Limited and (2) Novae Syndicates Limited

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 08/05/2012.

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