Dubai court orders company to repay insurer Dh1.7 million over warehouse fire

Dubai: The Dubai Civil Court of First Instance has ordered a company to pay Dh1.698 million to an insurance company, representing compensation paid to an insured business whose warehouse was damaged by a fire that spread from a neighbouring warehouse. The case arose from a fire that broke out in a warehouse in one of Dubai's industrial areas before spreading to an adjacent warehouse insured against fire risks by the plaintiff insurance company. Following the incident, the insurer settled its client's claim and paid Dh1,698,734 as compensation for the damage. In return, it obtained a discharge and settlement agreement transferring to the insurer the insured company's right to seek compensation from the party responsible for the loss. To determine the cause of the fire and establish liability, the court appointed an expert panel that included a fire expert from Dubai Civil Defence and an insurance expert. The experts found that the fire had originated in the neighbouring warehouse and that materials in the area where the fire began had been exposed to highly flammable substances and a heat source. However, they were unable to determine whether the ignition source was an electrical fault, work being carried out at the site, or a defect in electrical circuits. The defendant company sought to bring two insurance companies and another company into the case in an attempt to seek recourse against them for any judgment issued against it. However, the court rejected the subsidiary claim after finding that the company had failed to pay the required court fees despite being granted sufficient time to do so. Although the exact technical cause of the fire could not be identified, the court ruled that this did not remove the responsibility of the company that had control over the highly flammable materials stored in the warehouse. The court said such materials require special care to prevent harm and that liability provisions under the Civil Transactions Law therefore applied. In its judgment, the court relied on Article 271 of the Civil Transactions Law, which provides that any person who has control of items requiring special care to prevent harm, or mechanical equipment, is responsible for damage caused by them unless the damage was impossible to prevent. The court also confirmed that an insurer that pays compensation has the right to pursue the party responsible for the damage, replacing the insured party in relation to its rights arising from the incident up to the value of the compensation paid. It concluded that the defendant company was liable for the losses suffered by the insured company and ordered it to reimburse the insurer the full compensation amount of Dh1.698 million.