Raymond Thomas Porter v Zurich Insurance Co
In March 2001, following a series of disastrous events in his business and private life, the insured set fire to his home in an attempt to kill himself. But as the flames took hold he changed his mind and escaped. The house was left uninhabitable and boarded up.
Over the next few months, there were three thefts from the property. On the first occasion, the iron entrance gates were lifted off their hinges. The second and third incidents involved the theft of house contents that may or may not have been damaged in the fire.
The insurer's loss adjuster was unable to make any of the usual investigations because of a complete lack of response from the insured. No meetings took place, no inspections of the property could be arranged and no statements were taken.
Six months after the fire, the insured and his wife surrendered the property to the mortgagees and the house was sold. Some time during the following year, the insurer closed its file. Nothing further was heard until these proceedings were issued in March 2007.
The insured’s home and contents policy specifically excluded "any wilful or malicious act by a member of the family or by a person lawfully at or in the house".
The insurer denied the fire claim on the grounds that it had been started intentionally. It is a principle of public policy that the court will not assist a criminal who seeks to recover any kind of benefit or indemnity for his crime.
It is also a general rule of insurance law that an insured cannot normally recover under a policy when he has intentionally brought about the event. The insurer has not agreed to pay for the insured’s deliberate act. In any event, the insurer argued, this was a wilful or malicious act that fell within the policy exclusion.
The insured said that none of this applied because on the night of the fire he was insane. In other words, his mental state was such that he could not be held legally responsible for his actions.
As for the theft claims, a general condition in the policy required the insured to co-operate with the insurer in respect of any claim and to provide all information and evidence as may be reasonably required.
The insurer maintained that the insured’s failure to cooperate meant that it had not been able to ascertain whether the property had been adequately secured, or sort out apparent duplications between items claimed as fire damaged and those subsequently stolen or calculate their residual value, if any.
This, the insurer argued, was a breach of contract giving rise to a claim in damages that effectively cancelled out any claim the insured would otherwise have under the policy.
Having carefully considered the evidence, the judge concluded that, when he started the fire, the insured was not insane.
Insanity is measured according to the M'Naghten rules. To be able to recover for the consequences of his intentional act, the insured needed to prove on the balance of probabilities that, on the night of the fire, he did not know the nature and quality of the act he was committing or, if he did know it, that he did not know what he was doing was wrong. Anything less than this and the claim would fail.
The judge was satisfied that the evidence made it plain beyond any doubt that the insured had been in control of his actions and had set the fire in a clear and deliberate way.
In the judge’s analysis, three ingredients led the insured to do what he did. The first was that he was suffering from a persistent delusional disorder; the second was a series of shattering life events and the third was alcohol. The insured’s mental state was not, on its own, sufficiently causative to meet the test of insanity.
The fire claim, therefore, failed on the grounds of public policy, general insurance law and the policy exclusion for wilful and malicious acts.
The judge, however, held that the theft claims should not be dismissed.
It was not suggested that the claims cooperation clause was a condition precedent to the insurer’s liability. The insurer was claiming damages for breach of an ordinary contractual condition and so had to show the breach had caused a quantifiable loss. That loss, it was argued, was equivalent to the sum it would otherwise have had to pay out.
The judge was satisfied that there had been a breach of the claims co-operation clause, even if unintentional. Insurers need to carry out investigations to be able to consider a claim. But the issue was whether the breach had caused the insurer a loss.
The mere absence of contemporaneous investigations did not necessarily mean the insurer had suffered a loss, let alone a loss equivalent to any sum otherwise payable under the policy. The court had to look at what those investigations would have revealed and why any investigations now would not lead to the same result or would simply prove impossible to carry out at all.
The insurer in this case failed to convince the judge that its position was radically worse than it had been in 2001.
The theft of the entrance gates had no connection with the fire. In the judge's view, the insured would have been able to add very little to the information the insurer already had or could obtain from the police. The insured's lack of cooperation made no difference to the situation.
The two thefts of contents were more complicated because the insurer needed to investigate any duplication and ascertain the value (if any) of the items. Without better paperwork or other independent evidence, the insured would have a difficult time maintaining these claims. But the judge could not say they would automatically fail because of the insured's earlier failure to cooperate.
The test for insanity applied by the judge is the one used in criminal law. This case is a reminder how difficult that test can be to satisfy. Merely showing the insured was suffering from a mental disorder at the time is not enough to relieve him of legal responsibility for his actions.
Also interesting are the judge's comments on the insurer's claim for damages for breach of an ordinary condition.
If the term is not a condition precedent, it can be very hard for an insurer to show it has suffered a loss caused by the breach. The passage of time, on its own, may not be enough. The insurer needs to be able to produce specific evidence, such as a key witness who has died in the interim, or evidence that crucial documents have been destroyed.
