INSURANCE LAW

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QUESTION 1
Fulka has recently bought a fire policy covering “the contents” of his warehouse
which is situated at No. 1, Jalan Lorong Cicak, Kuala Lumpur. The policy contains
the following terms:
a) damages to the contents by a violent storm shall be fully indemnified.
b) the insured shall inform the insurers “as soon as possible” upon the occurrence
of the peril insured against.
On 1-1-2007 thieves entered the said premises by making a hole in the roof and
managed to get away with a loot of RM20,000.00 that was kept in a safe at the office
part of the said building over the weekend. No other items were stolen and no other
damage to the contents was done by the said thieves.
Shortly after the thieves had left the said building with the loot, a violent storm hit
Kuala Lumpur, causing massive flooding to low-lying areas. Only Jalan Lorong Cicak
was not affected by the said flooding. As a result of the storm, rain water penetrated
Fulka’s premises through the hole in the roof and seeped into the electrical system,
thereby short-circuiting and causing a fire. The fire was extinguished by the automatic
sprinkler system installed in the warehouse. A week later, Fulka notified his insurers
of the loss and submitted his claims for goods damaged by:
a) rain water,
b) fire, and
c) water released from the sprinkler installation.
i. Advise Fulka on the success of his said claims.
ii. Would your answer differ if the roof was in fact blown off during the storm and
rain water had thereby caused damage to the goods in the warehouse?

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The issue of the problematic question is Whether Fulka, the insured can successfully
raised all of the above-mentioned claims; claims for goods damaged by rain water,
fire and water released form the sprinkler installation. However, before tackling the
issues in depth, it is necessary to first deal with the facts of the question. The type of
policy that was undertaken by Fulka is fire insurance policy which covers “the
contents” of Fulka’s warehouse situated at Jalan Lorong Cicak, Kuala Lumpur. The
said policy contains the following terms :
(a) Damages to the contents by a violent storm shall be fully idemnified.
(b) The insured shall inform the insurers “as soon as possible” upon the occurence
of the peril insured against.
Moving on to the statement of facts of the question. The occurence of the first event
happened on the 1st January, 2007, whereby thieves had entered Fulka’s premise by
making a hole in the roof and managed to get away with a loot of RM20,000.00. No
other items were stolen and no other damage to the contents was done by the said
thieves. The second occurence of the event happened shortly after the thieves had left
the said building with the loot, a violent storm hit Kuala Lumpur causing massive
flooding to low-lying areas. Only Jalam Cicak was not affected by the said flooding.
The third occurence of the event resulted from the violent storm, happened when the
rain water penetrated Fulka’s premises through the hole in the roof and seeped into
the electrical system, thereby short-circuiting and causing a fire. Lastly, the fourth
occurence of the event, the fire was extinguished by the automatic sprinkler system
installed in the warehouse.
It has to be noted that the occurences of the event are arranged in such manner for
better understading of the issues.
Having said that, we now move on to the principles of law that are related to the
situation at hand.
The principle of loss is categorized into two forms namely; loss of goods and loss of
limbs or body parts. Since the question revolves around the losses of Fulka’s goods,
therefore, principle of loss of goods shall be discussed in details. By virtue of the case

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Holmes V Payne1, the court held that the uncertainty of the recovery of goods may
constitute a loss of goods.
Next, the principle of causation. Causation is defined in Becker, Gray & Co V
London Assurance Corporation2 as an active, efficient cause that sets in motion a
train of events which bring about a result, without the intervention of any force
starting and working actively from a new and independent source. According to Lord
Shore in Leyland Shipping Co V Norwich Union Fire Insurance Society, 3
“...Causation is not a chain but a net...The cause is...proximate in efficiency. That
efficiency may be preserved although other causes may have sprung up which have
not destroyed it or impaired it and..may culminate in a result of which it still remained
the real efficient cause to which the event can be ascribed...”
In other words, the important keywords that can be extracted from above-mentioned
cases would be , an active and efficient cause, train of events, causation of loss and a
result.
Haing discussed this, now we move on to the burden of proof in order to establish the
principle of causation. The burden of proof lies on the Insured, Fulka whereby he
needs to prove that loss comes within the policy wording. The general rule of this
principle would be Insurer is liable only for loss which is proximately caused by the
insured event whereas on the part of the Insured, he must show that the loss for which
a claim is made was caused by one of the perils which Insurer contracted to cover.
For better understanding of this concept, the doctrine of proximate cause needs to be
established here. This doctrine, exists in situations where there are two or more
competing causes acting together to bring about a loss.4
Here, it is important to
determine the actual or real cause of the loss- What is the effective cause that
contribute to the loss of the goods? What is the dominant cause? Or the primary
cause?. To answer these questions, the case of Reischer V Borwick5 is used to
illustrate the point. In this case, the court held that the proximate cause of a loss was
1 [1930] 2 KB 301
2 [1918] AC 101
3 [1918] AC 350
4 John Birds. Birds’ Modern Insurance Law 7th edition Thomson Sweet & Maxwell,
2007, p. 249
5 [1894] 2 QB 548

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the cause which led naturally to the loss in the absence of any intervening cause to
intterupt the flow of events. On the other hand, in Leyland Shipping Co Ltd V
Norwich Union Fire Insurance Society6, the proximate cause of a loss is not the
cause which is the last in time to bring about the loss.
Having said this, applying all the relevant principles with the problematic question
above, the burden of proof is on the insured, Fulka to prove that “the contents” of his
warehouse or goods comes within the policy wording and the goods were covered by
the said policy. Therefore, in order to determine whether Fulka can successfully
recover all of his claims, it is vital to ascertain the proximate cause of those
occurences.
The policy specificaly and expressly stated that the insurer will only cover damages of
the goods if it is caused by fire or/and violent storm. It was established in the third
paragraph of the statement of facts that shortly after the thieves had left Fulka’s
premise, a violent storm hit Kuala Lumpur, causing massive flooding to low-lying
areas. However, it has to be noted that only Jalan Lorong Cicak ( Fulka’s premise)
was not affected by the said flooding. As a result of the storm, rain water penetrated
Fulka’s premise through the hole in the roof.
The issue of whether rain water falls under the definition of “violent storm” need to
be considered in solving this particular issue. It is clear that the policy only recognizes
damages that were done by voiolent storm, and rain water was not included in the
wording of the said policy. Moreover, applying the fact that Jalan Lorong Cicak was
not affected by the said flooding further strengthened this particular argument. Thus,
Fulka might not be successful in his claim- losses caused by rain water because it was
not expressly included in the policy as per doctrine of proximate cause of loss- loss
must be within the risk insured.
As for Fulka’s claim for goods damaged by fire, the fire had broke as a result of the
storm that brought about the fact that rain water had penetrated his premise through
the hole in the roof and eventually, seeped into the electrical system, thereby short-
circuiting and causing a fire. To illustrate further, the case Marsden V CC
6 [1918] AC 350

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Insurance7 shall be discussed in detail. The facts of the case revolves around a policy
covered on plate glass at the place of business against damage from any cause except
fire. Insured’s neighbor’s property caught fire. A big crowd had gathered, causing a
riot to break out. As a result, the plate glass was broken. The issue of the case that
concerns the court was What is the proximate cause of the loss? Did fire caused the
loss? Or the riot? The court held that the insurer was liable and not excluded form its
liability as the riot, not the fire, caused the loss. The fire merely facilitated the loss.
The insured managed to recover his loss. Another case that can be cited here is the
case of Winicofsky V Army & Navy Insurance.8
This case concerns with the policy
against theft. The goods were stolen during an air raid and the insurer relied on the
exclusion clause to escape its liability. Some of the issues that are highlighted in this
case are, Was the loss covered by the policy? Was the loss caused by an air raid? (loss
is not covered) or was the loss caused by theft? ( loss is covered within the insured
peril). The court held that, the theft was the real cause of loss. The air raid facilitated
the loss.
Relying the principles of the cases Marsden V CC Insurance and Winicofsky V
Army & Navy Insurance, the act of the thieves who made a hole in the roof is a
contributing and facilitating factor which leads the rain water to seep into the
electrical system and thereby short-circuiting and causing a fire. The prominent and
proximate cause is still the fire which had destroyed the goods and obviously, falls
under the wording of the policy. Therefore, Fulka may successfully recover his claim
for goods damaged by fire.
The facts further state that the fire was extinguished by the automatic sprinkler system
which was installed in the warehouse. The installation of the automatic sprinkler
system in the warehouse can be regarded as Fulka’s effort or preventive act which
was undertaken by him to ensure that the contents of his warehouse are save from any
kind of destruction. An insured is entitled to recover an indemnity from an insurer
only when the property insured is damaged by an insured peril. In the face of an
imminent peril, the insured is entitled to take preventive action in which any loss or
damage suffered by the property insured as a result of actions taken by the insured to
7 (1865) 12 Jur NS 76
8 (1919) AC 350

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prevent the destruction of the property by an insured peril may be recovered from the
insurer as a loss from the risk insured.9
By virtue of the case Symington V Union Insurance Society of Canton,10
the
subject, a cork is covered under the transportation policy. While on the jetty awaiting
to load, a fire had broke out. In order to prevent the spread, the cork was thrown into
the sea and the sea water was thrown on the remainder. The issue that was raised was
the loss caused by sea water? (loss is not covered) or by the fire? (loss is covered) and
the court decided that the loss was indeed caused by the fire. The act of throwing the
cork into the sea was regarded as a preventive action and therefore, there is no break
in the causation of chain and loss is recoverable under the terms of the policy as the
said loss due to fire.
In application, Fulka might be able to recover his losses under this ground as the
installation of the automatic sprinkler system is seen as a measure on the part of Fulka
to safeguard his goods in the warehouse and any loss or damage suffered by the
property insured as a result of the preventive action taken by Fulka is clearly
recovered from the insurer as a loss from the risk insured.
Moving on to the minor issue of submission of claims. As per statement of facts of the
question at hand, Fulka notified his insurers of the losses and submitted his claims a
week after the incident. The question of does a period of one week suffice the
requirement of “the insured shall inform the insurers as soon as possible upon the
occurence of the peril insured against” need to be addressed accordingly here. In the
eyes of Insurance Law, one week is deemed to be a reasonable period to constitute the
term “as soon as possible” being fulfilled by Fulka.
In tackling the second part of the problematic question, the issue of whether the
answer would be different if the roof was in fact blown off during the storm and rain
water had thereby caused damage to the goods in the warehouse will be answered in
the following paragraph.
9 John Birds. Birds’ Modern Insurance Law 7th edition Thomson Sweet & Maxwell,
2007, p. 246
10 (1928) 97 LJ KB 646

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My answer would definitely be different if the roof of Fulka’s premise was in fact
blown off during the storm and rain water had thereby caused damage to the goods in
the warehouse as storm is deemed to be the prominent and dominant cause of the loss.
By virtue of the case Forwarding Shipping V Nusantara Worldwide Insurance,11
the brief facts of the case involves a marine policy on barge and crane against risk
including perils of the sea, river, lake, or other navigable water. The crane and timber
logs were towed from Bintulu to open sea for off-loading to another ship. Later, the
weather had worsened, causing the barge and crane sank. The insured initiated a claim
and argued that the loss was caused by the perils of the sea. The issue that arose was
the cause of loss due to perils of the sea or heavy load of timber? The court held that,
the proximate cause of loss was peril of the sea as there was a sudden change of sea
condition to heavy storm.12
Appying the principle of the above-mentioned case with the problematic question at
hand, a sudden change of weather to heavy storm is regarded as a proximate cause of
loss. Moreover, the fact that the roof of Fulka’s premise was blown off during the
storm is a clear cut incident that would result to the rain water to cause further
damage to his goods. A reasonable man would be able to predict the consequences
and apply his common sense that the storm was the proximate cause of a loss. In
conclusion, Fulka may recover his losses if the roof was blown off during the storm as
the policy clearly covers damages to the contents by a violent storm.
11 [2005] 1 MLJ 373
12 Irwin UJ Ooi. “The Forwarding Shipping and Bagusia Cases: A Perilous Approach by
the Malaysian Judiciary to Perils of The Seas in Marine Insurance?” (2008) 22 A&NZ
Mae LJ