We act for the owners of a manufacturing company that suffered a catastrophic fire in one of its installations at the factory. We have been advising in relation to insurance recoveries and are taking forward a claim against the business’s insurance broker for losses valued at around £7m.
The claim is a classic professional negligence claim, an area in which we handle scores of claims at any one time in various sectors and against a variety of professionals.
In this case the costs of the fire damage should have been paid out by the company’s insurers. They should have accepted liability under the insurance policy within days and made an interim payment towards the company’s business interruption losses whilst it was unable to produce and sell its product. The particularly severe damage was to a particular installation that caught fire but the fire spread to other parts of the facility causing enormous damage. The factory was unable to make its product for sale, but continued to have a great deal of ongoing fixed operating costs.
Instead of accepting that the loss was covered, the insurance company’s loss adjusters asked a multitude of questions which resulted, after a few weeks, in an avoidance of the insurance policy. This left the company without any cover at a time when its equipment was destroyed. Trading losses on operating costs accumulated to a critical degree and it went into administration.
The company’s insurance broker had acted for the business over many years, yet the questions asked by the insurers related to information well known to the broker and which ought to have been dealt with by them. Had the brokers done their work properly the insurers should not have been able to avoid the insurance cover. We made a claim against the broker for professional negligence in placing cover for the manufacturer and in making the claim to insurers.
One of the first issues we needed to deal with was taking a legal assignment of the claim from the administrators since the insured company was no longer able to bring a claim. The claim was made by the shareholders, as if they were standing in the shoes of the company.
One of the other issues we encountered was reluctance on the part of the brokers to provide their files in the pre-action phase. This is not unusual but we were able to press for more files and they revealed a number of areas in which the brokers were found lacking. They had the information that the insurers had said should have been provided before renewing the insurance cover; yet had failed (on the insured’s behalf) to provide it to insurers. This failure proved to be extremely damaging to the insurance cover.
An early exchange of documents in the pre-action phase is vital to flush out evidence early on and this can assist to bring about early resolution. It is not really in anyone’s interest for documents that seriously impact the merits to be provided late, by when costly litigation is underway. It is a difficult line to tread though because if there are harmful documents it can be tempting for defendants to withhold them pre-court in the hope the claim will go away. However, a forensic approach to the likely types of documents that exist and an enquiring mind can pay dividends for claimants: applications can be made to court for pre-action disclosure if there is any doubt about the sincerity of the defendant’s approach to the pre-action phases.
As well as broker claims, we recover from negligent solicitors, accountants and surveyors all of whom owe duties of care to their manufacturing clients. If they make a mistake they should have professional indemnity cover to step in and resolve the damage and we can assist in that process, seeking the fastest and least cost route to resolution at all times.