ADMIRAL INTERNATIONAL PTY LTD V INSURANCE AUSTRALIA LTD

[2022] NSWCA 277, Chief Justice Bell, Justice of Appeal Ward (President) and Justice of Appeal Macfarlan, 20 December 2022

Insurance (liability and property) – Fire at warehouse – Fraud – Whether assured’s controller party to arson – Whether assured failed to take reasonable precautions – Damages for late payment – Assessment of business interruption losses

Admiral operated a warehouse in Sydney, storing bonded goods. Admiral’s Managing Director was X, and his father Y, was employed by Admiral. Tobacco with a value in excess of $6 million was delivered to the warehouse in the week ending Friday 13 April 2018. On the morning of 16 April 2018 there was a major fire that destroyed the warehouse. X was in Hong Kong at the time. Admiral was insured by CGU under a Liability Policy, which imposed upon Admiral the obligation to take reasonable precautions to prevent loss. Admiral was also insured by CGU against property damage and business interruption losses under a Special Risks Policy which excluded liability for loss happening through fraudulent or dishonest acts but which provided cover for third parties who were not implicated in any fraud or dishonesty. The Special Risks Policy responded to a claim by the owner of the tobacco, but there were two claims by Admiral against CGU: under the Liability Policy for breach of the bailment contract with the owner of the tobacco; and under the Special Risks Policy for business interruption losses.