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Insurers liable to indemnify tradesman for fire caused by discarded cigarette despite 18 month delay in notification

Milton Keynes v NIG [2011] EWHC 2847 (TCC)

Following three fires that caused extensive damage to a Council recycling centre near Milton Keynes, the Council’s property insurers sought to recover their outlay. There were two main issues: (a) the cause of the fires and (b) whether NIG been prejudiced by the failure of its insured, Mr Nulty, to give notification of a potential claim.


Edwards-Stuart J concluded that the most probable cause of the first fire was a cigarette end discarded by Mr Nulty, an electrical engineer. Applying the analysis of the authorities since The Popi M as summarised by Akenhead J in Fosse Motor Engineers v Conde Nastthis was in law the cause of the first fire. The second and third fires were re-ignitions of the first.

Policy Coverage

Immediate notification of any incident which could result in a claim was a condition of Mr Nulty’s tradesman’s liability policy. However, as the clause was not a condition precedent, NIG could only reduce its liability to indemnify Mr Nulty if it had suffered prejudice. Even though in the immediate aftermath it had not been suggested that a cigarette end discarded by Mr Nulty had caused the first fire, Mr Nulty was under an obligation to notify NIG of the fire immediately. However, he could not reasonably be expected to do so until it became reasonably clear that there was no obvious alternative cause. This date occurred within days of the first fire. NIG asserted that there were various respects in which it had been prejudiced and contended for a set off of up to 100%. Edwards-Stuart J did not consider that either individually or collectively these grounds were very powerful but, nevertheless, accepted that, as a result of the 18 month delay in notification, NIG had lost the chance (which was more than nominal) to establish an alternative cause of the fire. He concluded that the correct approach was to assess NIG’s claim against Mr Nulty on a loss of a chance basis unless the claim was too intangible for him to do so. The loss of a chance was to be assessed “largely as a matter of impression looking at the circumstances of the case as a whole”. On this basis Edwards-Stuart J valued the chance at 15% with the result that the Council recovered 85% of the indemnity.

Andrew Rigney QC appeared for the claimant, instructed by Clyde & Co. A copy of the judgment is available here.

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