SUPREME POWER AUTO SDN BHD v MSIG INSURANCE (MALAYSIA) BERHAD PIHAK TERKILAN CHONG YING KEONG

Case Significance

Confirms that an insurer relying on a storage warranty to avoid a fire claim bears the burden of proving the warranty was breached, and holds the insurer liable where the fire was accidental and the warranty was not breached.

This High Court decision at Kuala Lumpur, in the Commercial Division, is one of a group of consolidated suits tried together arising from a single fire that destroyed a factory, and it concerns the claim by the insured against one of the insurers under a fire policy. The insurer resisted the claim principally on the basis of a storage warranty in the policy, contending that the insured had breached a Storage of Hazardous Goods Warranty that restricted the quantity of flammable liquids kept on the premises, and that the breach entitled the insurer to avoid liability. A subsidiary but connected question was whether the fire had been accidental or deliberately caused.

On the cause-and-origin question, the court analysed the expert evidence within the framework of the National Fire Protection Association's NFPA 921 Guide, weighing the theory that multiple seats of fire indicated an incendiary origin against the evidence as a whole. It concluded that the experts asserting a deliberately set fire had not made good their case, and it found that the fire was accidental and not deliberately caused.

The warranty question turned on whether the insured had exceeded the permitted storage of flammable liquids, expressed as a limit on the total volume of liquids giving off flammable vapour with a flash point at or above a specified temperature. The court examined the evidence of what was stored and found that the warranty had not been breached, so that the insurer was not entitled to avoid liability under it. An insurer relying on a warranty to defeat a claim bears the burden of establishing the breach, and that burden was not discharged here. With both the accidental-cause and the warranty questions answered in favour of the insured, the court held the insurer liable and ordered the insurers, across the consolidated suits, to bear the costs of the trial in an apportioned sum. The judgment is a clear application of the principle that an insurer relying on a storage warranty to avoid a fire claim must prove the warranty was breached.