Insurance for commercial premises: a warning

A recent Court of Appeal decision reinforces the importance for businesses of having insurance cover for losses occasioned by fire on their premises. The decision clarified that, although damage caused by fire emanating from an adjoining property could fall within the Rylands v Fletcher rule relating to non-natural use of land, such a case was likely to be “very rare”. Therefore it will be difficult to bring a successful claim for fire damage without proof of negligence.

In this case, a landowner operated a business supplying and fitting tyres from a trading estate. About 3,000 tyres were stored in and outside the building. The neighbour owned premises located behind the landowner’s premises. A fire broke out on the landowner’s premises and, fed by the eventual ignition of the large stack of tyres on his land, spread to the neighbour’s premises. Both premises were completely destroyed by the fire. The landowner was not at fault for the cause of the fire, which lay in the wiring or electrical appliances in his premises.

The rule in Rylands v Fletcher imposes strict liability on a landowner for damage caused by their non-natural use of their land. The storage of substantial quantities of chemicals on industrial premises is a classic example of non-natural use. A landowner will have no liability where it has made only natural use of the land.

If you have any queries about this article please contact DFA Law Partner Mark Brown.