Supreme Court: Cause of Fire Is Irrelevant If Insured Did Not Cause It
The Supreme Court has clarified that in fire-insurance cases, the exact cause of the fire is immaterial as long as it is not proven that the insured deliberately caused it.
Key Legal Principles
The Court held that the insurer cannot deny liability merely because the precise origin of the fire is uncertain, provided that the insured property was covered under the policy and the fire occurred during its validity period.
Unless there is evidence that the insured intentionally caused the fire or acted fraudulently, the insurer remains bound to honour the policy.
The ruling reinforces the principle that fire-insurance contracts are based on good faith and that technical uncertainties about how the fire started cannot be used to reject legitimate claims.
Case Background
The case concerned a warehouse that had been insured under a fire-insurance policy. A fire broke out, destroying significant goods and property. Reports suggested possible causes such as a short circuit or sparks from welding work, but there was no conclusive proof of either.
The insurance company refused to settle the claim, citing inconsistencies about how the fire began and alleging negligence on the part of the insured. The insured party approached the courts seeking compensation under the policy.
Court’s Observations
The Supreme Court observed that:
Once it is shown that the property was insured and the fire occurred within the insured premises, the insurer cannot escape liability simply because the cause is uncertain.
The only relevant question is whether the insured was directly responsible for instigating the fire. If not, the policy must respond to the loss.
The Court emphasised that denying claims due to ambiguity about the fire’s cause would undermine the very purpose of fire insurance, which is to provide financial protection against unforeseen losses.
Outcome
The Supreme Court ruled in favour of the insured, directing the insurer to honour the claim. It reiterated that insurance companies must act fairly and not rely on speculative reasons to avoid payment.
Significance
This judgment reinforces that insurance coverage should not be denied due to uncertainty in the cause of fire, as long as the insured is not at fault. It serves as an important precedent protecting policyholders from arbitrary repudiation of claims in fire-insurance cases.
