TCC acquits insured of negligence and breach of contract but would have upheld insurers’ breach of warranty defence

3 April 2012

The Claimant (“UMA”) owned a large aggregate processing plant on the Thames, near Greenwich, at which there was a very serious fire on the morning of Sunday, 3 February 2008. UMA contended that the fire was caused by hot work being carried out by the Defendants setting fire to the rubber lining in a steel hopper or chute.

The Defendants denied that they had negligently and/or in breach of contract caused the fire but, if they were liable, they claimed an indemnity from their public liability insurers, Novae Syndicates Ltd (“the insurers”). The insurers denied liability on the ground that the Defendants were in breach of a Burning and Welding Warranty in the policy, which was expressed to be a condition precedent to any liability.

The primary case of the insurers was that the warranty was absolute in the sense that it as such:

  • the policy required exact compliance
  • it was immaterial that a breach of such warranty may have no connection with the loss
  • likewise that such breach might not affect the risk
  • or that breach occurred without fault on the part of GM as assured
  • or that compliance was onerous
  • or that any breach discharged Novae from any further liability from the date the warranty was breached.

The warranty required that all combustible materials in the immediate vicinity of the work that could not be moved had to be covered and protected by some non-combustible material.

In his judgment Mr Justice Edwards-Stuart exonerated the Defendants from liability for negligence and breach of contract but held that, if the outcome had been otherwise, the Defendants were indeed in breach of warranty and would not have been entitled to indemnity from the insurers. In doing so the Court rejected the Defendants’ argument that the warranty had been sufficiently complied with and would have upheld insurers’ primary case.

Philip Shepherd QC acted for Novae Syndicates Limited instructed by Philip West of Kennedys Law.