NULTY V MILTON KEYNES BOROUGH COUNCIL

[2013] EWCA Civ 13, Lord Justice Longmore, Lord Justice Toulson and Lord Justice Beatson, 24 January 2013

Insurance (public liability) - Test for determining cause of loss - Third Parties (Rights Against Insurers) Act 1930

The Council owned a recycling centre. N, a self-employed electrical engineer, had been appointed to carry out certain works at the centre. On 2 and 3 April 2005 two fires occurred at the centre. N informed his public liability insurers about the fire some 18 months thereafter. Following N's death the Council made a claim against N's insurers under the Third Parties (Rights Against Insurers) Act 1930. At first instance Edwards-Stuart J ruled as follows. (1) There were three possible causes of the fires: a negligently discarded cigarette end by N; a faulty live electric cable; or an intruder. Although there was an absence of clear evidence, the court was able to discount the second and third possibilities, so that the first - the discarded cigarette end - was to be regarded as the most likely. (2) The assured was in breach of his contractual obligation to notify incidents immediately, but that clause was not a condition precedent and accordingly the insurers could not deny liability but could only recover damages for any loss suffered by them by reason of the late claim. On the facts, the insurers had lost the opportunity to prove that the loss had been caused by an uninsured peril, and the value of that lost chance would be assessed at 15 per cent. Only 85 per cent of the policy monies were recoverable.