Prestige Assurance Plc and another party appealed a court decision in a dispute with Sara Product Limited and another over a fire insurance claim. The insurers had issued a fire policy to Sara Product for its business premises and renewed it for the period from 1 September 2008 to 1 September 2009.
The premium of ₦5,787,799 was to be paid through eight monthly post-dated cheques.
A fire broke out on 23 January 2009 at Sara Product's insured premises at No. 184/185 Happy Home Avenue, Kirikiri Industrial Estate, Lagos. This occurred while the policy was active but before four of the post-dated cheques had been cleared.
Prestige Assurance appointed Benevolent Loss Adjusters Ltd to investigate. In a report dated 20 July 2009, the loss adjusters concluded that Sara Product had breached certain policy warranties and was responsible for the fire.
Based on this report, Prestige Assurance rejected Sara Product's claim. Sara Product then sued, seeking a declaration that it was entitled to indemnity under the policy and that the rejection was wrongful and breached the insurance contract.
Sara Product also demanded compensation of ₦901,981,400.15, representing the assessed value of its loss, or alternatively ₦875,000,000, the total sum insured, plus interest. The trial court ruled in Sara Product's favour and granted the reliefs sought.
Prestige Assurance challenged this at the Court of Appeal in Lagos, with judges Bola, Kwahar and Onwosi hearing the case. The key question was whether a valid insurance contract existed between the parties.
The insurers' lawyers argued there was no enforceable contract because Sara Product hadn't fully paid the premium before the fire occurred. They said the mere issuance and acceptance of post-dated cheques that hadn't all been cleared didn't constitute advance payment of premium as required by law.
"The contract of fire insurance was unenforceable," counsel for the appellants submitted to the court. They contended that only cleared cheques counted as payment.
The appellants' legal team also challenged the trial court's finding that Sara Product had substantially complied with policy warranties. They argued these warranties were conditions precedent to liability, meaning any breach entitled insurers to reject claims regardless of whether the breach caused the loss.
According to the appellants' counsel, Sara Product breached the warranty requiring that books and records be kept in a fire-proof safe. The records were destroyed in the fire because they weren't properly protected.
Counsel further contended that Sara Product violated the fire extinguishing appliances warranty by failing to provide required fire-fighting equipment. These breaches, they argued, gave Prestige Assurance legitimate grounds to repudiate the claim.
