Rural Fires and Insurance

A recent decision of the High Court about the danger of burning fires on lifestyle blocks is relevant to farmers. The danger is not only the loss of property, but also the financial liability for putting the fire out.

In the New Zealand Fire Service Commission v Legg the Fire Service Commission and Selwyn District Council sued Legg for the cost of extinguishing a fire that spread through a number of lifestyle properties in Canterbury. The total cost was $217,118.

The defendants’ property and the landscaping business situated on the property that the defendant ran from the property were insured with different insurers. Legg was relying on his insurance company to pay for the loss suffered. The issue was not whether Legg had caused the damage by lighting the fire. The burn heap, which was at the centre of this dispute, had reignited causing a major fire.

The court found that there was nothing careless or reckless in Legg setting the fire heap alight in December, or in subsequently tidying up.

The major issue was whether either of the insurance policies included any obligation to indemnify the claims made by the Commission and the district council for damage caused by fire.

The first insurance company contended that Legg had been in breach of a reasonable care condition in the policy. The court rejected this argument. The court noted that it was up to the insurance company to prove that Legg had been reckless or grossly irresponsible.

The other insurance company also argued that they were not liable because of an exclusion clause in the policy. The court held that, having regard to the purpose and context of the insurance policy and the purpose of the exclusion clause, the exclusion clause did not apply in this case.

Farmers should be aware that, even though they have insurance cover for fire and consequential damage, the insurance company may do all that they can to avoid liability.

Managing the risk of fire is an important responsibility of everyone in the rural sector.  Reignition is a real problem and ensuring that you inspect the fire heap on a continuous basis to ensure that the fire is out is an important responsibility.

However, it is also important that you examine your insurance policy carefully.  Employ an insurance broker if you need an independent adviser to check the wording of the policy to ensure that you have the cover that you expect and intend.

All of these actions will go a long way to avoiding the stress and emotional and financial cost of having to fight the insurance companies in court for cover that you assumed you already had in place.

Written by Ian Blackman