Latimer Hinks, is warning that a recent case at the Court of Appeal should highlight to commercial property owners and tenants that they keep up to date with their insurance obligations.
Last month, the Court of Appeal ruled in the case of Stannard (t/a Wyvern Tyres) v Gore that a tyre-supply company was not liable to the owner of the adjoining premises when a fire broke out and destroyed both units.
The Court heard the case of Wyvern Tyres, a Hereford-based tyre supply company which was holding more than 3000 tyres on its premises when an electrical fault started a fire, which spread to adjacent premises.
Basic legal principles state that a party cannot be held responsible for damage unless it is deliberate or as the result of negligence. There was no negligence here but the County Court found Wyvern Tyres liable under a long-standing rule known as Rylands v Fletcher (1868.) In this case, the land owner was liable for nuisance arising when water from the owners reservoir flooded into a mine on neighbouring land.
When Wyvern Tyres challenged the decision, the case went to the Court of Appeal, where the County Court ruling was overturned. The judges said that the conditions for liability under Rylands v Fletcher were not fulfilled: no one would describe tyres as exceptionally dangerous, and the fire had not been deliberately brought to the adjacent properties.
Neil Stevenson, specialist lawyer in commercial property at Latimer Hinks, said: "This ruling comes as no surprise at all as Rylands v Fletcher has always been controversial. Back in the nineteenth century it was heavily criticised as putting a brake on enterprise and wealth creation.
"Today, we are far more used to risk-assessment obligations, and the lesson from environmental disasters over the last fifty years is that companies storing dangerous materials, whether it is a slag heap, a chemical factory or a nuclear plant, must accept their responsibilities and pay the price if they get it wrong.
"It is imperative that commercial owners and tenants realise they will not be able to pin the blame upon somebody else in this sort of situation, and make sure their insurance is robust and meets all their obligations for property, plant and machinery right through to business interruption.