Porter v Zurich Insurance Company

An insured cannot recover for fire damage intentionally caused by his own criminal act unless, on the balance of probabilities, he proves insanity under the M’Naghten rules. Mental illness, impaired judgment, intoxication or impulsive conduct is insufficient unless the insured did not know the nature and quality of the act, or did not know that it was wrong. A policy exclusion for a wilful act may extend to reckless conduct, but the insured’s state of mind remains central. A breach of an insurance condition requiring co-operation is not automatically a complete defence or a condition precedent. The insurer must prove the loss caused by the breach, supported by specific evidence showing what timely investigations would have established or why investigation is now impossible.

Mr Porter claimed under a household insurance policy for damage caused when he deliberately set fire to his home while suffering from a delusional disorder, depression and alcohol misuse. The insurer relied on public policy, general insurance principles and an exclusion for wilful or malicious acts.

Mr Porter also claimed for three subsequent thefts from the property. The insurer alleged breaches of the policy’s co-operation condition because Mr Porter and his solicitors failed to facilitate meetings, inspection and investigation. The central issues were whether the fire claim was excluded by Mr Porter’s mental state and conduct, and whether the co-operation breaches defeated the theft claims.

1. Fire claim. The claim failed. Public policy and the general law of insurance prevent recovery for loss intentionally caused by the insured’s own criminal act. The policy’s exclusion for wilful or malicious acts also applied.
2. The relevant insanity test was the M’Naghten test. Mr Porter had to prove that, when he set the fire, he did not know the nature and quality of the act, or, knowing that, did not know that it was wrong. Mental illness falling short of that test did not suffice.
3. The evidence showed that Mr Porter intended to kill himself, deliberately placed and ignited newspaper to set fire to the furniture and curtains, and understood what he was doing. His shame after leaving the property showed that he knew the act was wrong. His delusional disorder, difficult life circumstances, alcohol consumption and cessation of medication were contributing factors, but did not establish legal insanity.
4. The court accepted the approach in Patrick v Royal London Mutual Insurance Society Ltd that, in this context, a wilful act may include reckless conduct where the insured is aware of the risk of the relevant damage or does not care whether it occurs.
5. Theft claims. Mr Porter breached the co-operation condition. However, the condition was not a condition precedent. The insurer’s remedy was damages for breach of contract, and the breach did not automatically extinguish the substantive claims.
6. The insurer had to prove causation. It needed specific evidence that timely investigations would probably have shown the claims to be unsustainable, or that the claims had become impossible to investigate. The general absence of contemporaneous investigation was insufficient. The theft claims were therefore not dismissed, although they required radical repleading and the consequences of the breaches could be addressed at the quantum hearing.