Damage By Tenants And The Meaning Of 'Malicious' In A Property Insurance Context

Mandalia v Beaufort Dedicated No2 Ltd [2014] EWHC 4039 (QB)

The Claimants own shop premises which were let out to (what they describe as) "bad tenants". These tenants failed to pay all rent due and to carry out fit-out works to a satisfactory standard. Accordingly, proceedings for possession were commenced against them. The Claimants allege that the tenants thereafter entered the premises and stripped out much of the contents. However, most of the fixtures and fittings which were removed were owned by the tenants.

The Claimants sought to claim under their commercial combined insurance policy, issued by the defendant. The relevant policy wording covered loss or damage by "malicious persons". There was also cover for theft, including damage to the premises, but excluding damage which did not involve "entry to or exit from that part of the building... by forcible and violent means, or actual or threatened assault". Although entry was effected using keys, it was alleged that the exit "took place in an atmosphere of intimidation" and that the Claimant's son was assaulted by the tenants' solicitor.

When the Defendants advised that the claim was not covered, the claimants brought a complaint to the Financial Ombudsman Service ("FOS"). They were awarded GBP 100,000 but they did not accept that, since their losses were alleged to be around GBP 200,000. The FOS award was not binding on the Court.

The Judge examined the meaning of "malicious" in the context of this case. He held that the use of the word in a criminal context was very different (where, in the absence of self-defence, it is difficult to see how it could not be "malicious" to, for example, wound by assault). The Defendant had referred to the OED definition of malice, namely "the desire to harm someone; ill-will". The Judge concluded that "it is plain to me, and I find that, the use of the word "malicious" in this policy was intended to connote an ill intent" which would mean that there had been "no reason for the item to be damaged in the course of the tenants...

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