Company director fails in appeal against decision to dismiss insurance claim over fire

The director of a company whose premises were destroyed by a fire has failed in an appeal against a sheriff’s decision to dismiss his action against an insurance firm over their refusal to pay out on a claim.

 

The sheriff found that it was “likely” that the three fires which damaged the building were started deliberately and therefore the policy was “void” - a decision upheld by the Sheriff Appeal Court.

 

 

Sheriff Principal Craig Turnbull, sitting with Appeal Sheriff Nikola Stewart and Appeal Sheriff Norman McFadyen heard that the appellant T & G Grampian Limited, which supplies specialist parts for sports and rally cars, leased premises at Kintore in Aberdeenshire for the storage of vehicles and specialist motoring stock. 

 

On 12 October 2013 there was a fire at the Kintore premises, which caused severe damage to the building and stock stored there by the appellant.  

 

The appellant intimated a claim to the respondent Allianz Insurance under his insurance policy in respect of losses incurred as a result of the fire, but following an investigation the respondent advised the appellant that they would not provide indemnity. 

 

The appellant commenced proceedings against the respondent in Aberdeen Sheriff Court, seeking declarator that the respondent was obliged to indemnify the appellant for all relevant losses sustained by them in terms of the policy; and for decree against the respondent for payment of £579,146, the sum of the appellant’s losses. 

 

 

Following a proof restricted to the crave for declarator, the sheriff held that the appellant, through its director Graham Clark, had used “fraudulent devices” to seek a benefit under the policy and that therefore the policy was void (finding in fact 1).

 

The sheriff found (finding in fact 39) that there was “no evidence” of credible accidental causes for the fire originating at either the first seat of fire, the second seat of fire or the third seat of fire, and that it was likely that all three fires were started deliberately. 

 

The fire did not start and develop in the way described by Mr Clark (finding in fact 40): it was likely that either (a) the fire was set by, or on behalf of, or with the knowledge and concurrence of Mr Clark, or (b) that the cause of the fire was an act or omission of Mr Clark which he has chosen not to disclose. 

 

In either event, the sheriff found, the circumstances of the fire as reported by Mr Clark to the (respondent) and their investigators during the course of their investigation, was “deliberately untruthful” (finding in fact 41). 

 

The sheriff, having held that the respondent was not contractually obliged to make payment to the appellant, granted decree of absolvitor in favour of the respondent.

 

 

The appellant appealed, seeking decorator as originally craved and thereafter to remit the case to the sheriff.

 

By reference to finding in fact 40, senior counsel for the appellant submitted that the sheriff assoilzied the respondents on the basis that either the fire was deliberately set by or on behalf of a director of the pursuers (Mr Clark) or that the cause of the fire was an act or omission of Mr Clark which he had failed to disclose to the respondents.  

 

However, it was contended that each of the alternative bases which founded the sheriff’s rejection of the pursuers’ claim was “flawed”.  

 

The court observed that while attractively presented, the appellants arguments approached the case from the “wrong direction”.

 

 

Delivering the opinion of the court, Sheriff Principal Turnbull said: “The preliminary proof was restricted to the appellant’s crave for declarator that the respondent was obliged to indemnify them under the policy. The starting point is, therefore, the policy and, in particular, the relevant terms of it. 

 

“As will be seen from the respondent’s averments read against finding in fact 40 and finding in fact and law 1 in the sheriff’s judgment, the sheriff has accepted the position of the respondent. Properly construed, the respondent’s averments do not amount to an allegation that the fire was caused by a wilful act of the appellant. 

 

“The sheriff accepted the case advanced by the respondent. They have discharged any onus incumbent upon them. Whilst it is true that the sheriff did not go so far as to find as a fact that the fires were started deliberately, that does not assist the appellant. The causes of the fires could not be determined (finding in fact 38). 

 

“For the appellant to be entitled to the declarator sought, it would have been necessary for the sheriff to have found that the cause of the fire fell within the definition of “Damage”. That requires the loss, destruction or damage to the property to be accidental. There is no such finding. 

 

“On the contrary, as set out in findings in fact 37 and 39, no evidence of credible accidental causes for the fire was found. 

 

“Accordingly, we conclude that, on the facts found by the sheriff, there was not a justified claim under the policy.”

 

In relation to the appellant’s challenge to the first alternative in finding in fact 40, the court considered that the sheriff was entitled to reach the conclusion he did.

 

Sheriff Principal Turnbull said: “When consideration is given to the totality of the findings in fact made by the sheriff…we cannot say that the sheriff was wrong…

 

“Finding in fact 40, insofar as it relates to the first alternative, was one the sheriff was perfectly entitled to make and is wholly consistent with the remaining findings in fact he made.”

 

However, the court held that in respect of the second alternative, having regard to the sheriff’s findings in fact, there was “no question” of the use of fraudulent device.

 

“To that extent, the sheriff was in error in making finding in fact and law 1,” the Appeal Sheriffs said, but that did not affect the entitlement of the appellant to indemnity under the policy.