Mandalia & Anor v Beaufort Dedicated No2 Ltd

In an insurance claim, coverage depends on the policy wording and on proving that the claimed loss falls within an insured peril. “Malicious” damage requires ill intent. Damage caused incidentally by a tenant’s removal of fixtures, defective works or lease dilapidations is not malicious merely because it is substantial or inconvenient. Theft cover requires the policy’s specified conditions, including forcible or violent entry or exit where applicable. Business interruption loss must be caused by insured damage, and recovery is limited to the period reasonably attributable to putting that damage right. Serious allegations of fraud remain subject to the balance of probabilities, although inherent probability is relevant when assessing the evidence.

The claimants owned commercial premises containing a takeaway and grocery shop, with flats above. They claimed under a commercial combined insurance policy for damage allegedly caused when their tenants removed property and fixtures, together with stolen items and loss of rent. The insurer denied cover, contending that most matters were lease dilapidations, that theft cover was excluded, and that the claim involved fraud.

The court considered the policy’s malicious damage, theft, accidental damage and business interruption provisions. It also determined whether the claimants had proved fraud and which items of damage were attributable to malicious conduct on 5 April 2009.

1. Fraud. The allegation against the claimants’ son failed. The standard remained the balance of probabilities. The seriousness of the allegation affected the assessment of inherent probability, but did not impose a higher standard of proof. The correspondence showed a genuine dispute about the scope of the claim rather than dishonesty.
2. Meaning of malicious damage. In this policy, “malicious” connoted ill intent. Damage was malicious where there was no proper reason for damaging the item during removal and the damage was done deliberately with the intention that it should occur. The court rejected the suggestion that ordinary carelessness, hurried removal, or damage incidental to removing tenants’ own fixtures was enough.
3. Policy cover. Physical damage was recoverable only under Peril D, subject to its exclusions. Peril N did not apply to the alleged theft losses. The claimants had not proved that the property damage resulted from theft, forcible entry or violent exit. The assault by the tenants’ solicitor was not connected with the theft. The accidental damage extension was also not established and would in any event be subject to the relevant exclusions.
4. Only the smashed toilets, forcibly removed kitchenette, replacement of heating radiators and pipework, and necessary cleaning were proved to result from malicious conduct. The recoverable physical damage was £8,250 after the excess. The remaining works principally constituted dilapidations or consequences of the tenants’ defective works and occupation.
5. Loss of rent was recoverable only for three months, the period reasonably required to remedy the insured damage. At £30,000 per annum this amounted to £7,500. The claimants therefore obtained judgment for £15,750, with interest or other consequential matters left for submissions.

Not an appeal. The judgment records no prior appellate decision relevant to the determination.