Breach Of Warranty: The Insurer's Burden Of Proof

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...