The insurer in the aftermath of an arson attack
Arson attacks have significant legal and financial consequences for an insurance company. Exclusion clauses in insurance policies limit coverage in the event of an arson attack, but what is the scope of these exclusions when the fire spreads further than anticipated by the fire starter. A cross-analysis by Maître LEPOUTRE of the firm HFW and Nicolas Patris, our fire cause and consequence research loss adjuster.
An investigation into the criminal act
In post-fire investigations, an analysis of objective evidence makes it fairly easy to demonstrate that the cause was not accidental: presence of several primary sites of origin, absence of an ignition source in the starting area, detection of an accelerant, abnormally rapid spread of fire, etc.
Other factors may also be of interest to loss adjusters during their investigations:
- Start time: most arson attacks take place between 10 p.m. and 6 a.m.
- The location of the site of origin:
- Unusual circumstances: serious or abnormal negligence, no traces of the property that has been reported as damaged, no evidence of a break-in, etc.
However, even if the intervention of a private investigator can provide additional clues, it is often very difficult to prove, with 100% certainty, the identity of the fire-starter.
Nevertheless, arson attacks have significant financial consequences, particularly because arsonists aim to totally destroy the property. It is generally considered that the cost coefficient of an arson attack is 2 to 3 times higher than a fire of accidental origin, particularly because the use of an accelerant often makes the propagation of the flames uncontrollable.
Case law that is unfavourable to insurers
This makes it difficult for insurers to accept being ordered to cover the consequences of arson, especially when it is clear that their policyholder had deliberately and intentionally started the fire but had not wanted to cause such serious damage.
With a judgement dated 8 March 2018 (Court of Cassation, Civil Chamber no. 2, 8 March 2018, no. 17-15143), the Court of Cassation reiterated this case law, which is very unfavourable to insurers. In this case, a policyholder deliberately set fire to their bar. The fire then spread to neighbouring businesses and properties. The bar’s insurer, who had managed to overcome the challenge of providing proof by demonstrating that the policyholder had deliberately used explosive substances to destroy the bar, asked to be relieved of any cover obligation on the basis of intentional fault and/or the absence of any hazards. The Court of Cassation dismissed the request. It pointed out that the insurer had referred to Article L113-1 paragraph 2 of the French Insurance Code which states that “the insurer does not cover loss and damage resulting from an intentional or fraudulent fault of the policyholder”. It also noted that the “multi-risk shop” insurance policy taken out by the policyholder stipulated the exclusion of “damage caused intentionally by the policyholder or any insured party, as well as damage caused with their knowledge,” and “damage whose operative event is not random in nature”. However, the Court of Cassation concluded that there was no evidence to suggest that the policyholder, in this case, “intended to cause the damage that occurred”.
As such, while the fire was intentional, the insurer was ordered to cover the damage to the neighbouring properties, as there was no evidence to suggest that the policyholder intended to destroy these properties as well as their own.
This case law is nothing new. It had recently been applied in the context of a carpark fire in which a woman had (deliberately) set fire to her ex partner’s vehicle, but apparently did not anticipate that the fire would spread and cause significant damage to the carpark’s structure. As a result, her insurer was ordered to cover the damage incurred by the carpark operator (Court of Cassation, Civil Chamber no. 2, 29 June 2017, no. 16-12154).
As such, some insurers have included a cover exclusion clause in their policies which broadens the scope of the notion of intentional fault. The clause now includes “damages of any kind deliberately caused or prompted by the policyholder”. Damage “caused” by the policyholder means damage deliberately caused by the latter and damage “prompted” by the policyholder means that resulting from the arson attack but not originally intended by the policyholder, i.e. the consequence of the uncontrolled spread of the fire.
In a judgement on 12 June 2014, the Court of Cassation ruled on these clauses and considered that they were devoid of formality and limitations and could not therefore be used against a third-party victim (Court of Cassation, Civil Chamber no. 2, 12 June 2014, no. 13-18844, Public Liability and Insurance no. 10, October 2014, comm. 321).
Insurers must therefore review their insurance policies and propose new wording for exclusion clauses relating to damage resulting from an uncontrolled arson attack.
Maître LEPOUTRE, Lawyer Senior Associate HFW
Nicolas PATRIS, Loss Adjuster Fire Specialty Manager
Association pour la lutte contre la fraude à l’assurance, (France)
Arson control forum, Survey of school fires. 2006 (England)