Successful Insurance Litigation Bulgaria – Law Firm Mikov & Attorneys’ lawyers successfully represented a Bulgarian company operating a photovoltaic park with 2.5 MW capacity in the first instance court proceedings against an insurance company. Four and a half years after the fire damaging almost one third of the PV Park, three years of procedural actions, impressive volume of collected evidence including among others surveillance cameras videos and footage, 112 calls records, eight expert reports, and nine witnesses, the insurer „З.к. Б. И. АД“ was sentenced by Sofia City Court to pay a total amount of approximately BGN 1 500 000.
1.Dispute Resolution Insurance
According to Bulgarian law and applicable court authority a valid insurance policy under which the insured party has paid the due premium shall provide in any case insurance coverage for the agreed insured risks as otherwise the fundamental purposes of insuring shall be jeopardised: providing protection of the interests of the insurance services consumers and creating conditions for the development of a stable, transparent, and effective insurance market.
Pursuant to art. 405, para. 1 of the Bulgarian Code on Insurance the insurer is obliged to pay compensation in due terms once an insured event occurs if a property insurance contract has been properly executed and the insured party has complied with the respective obligations. The insurer is entitled to deny the payment only in case of a non-fulfilled contractual obligation of the insured party that is in a causal relation with the accident happening, the magnitude of the caused damages or with the possibility for the establishment of such damages.
2.Litigation Bulgaria PV Park
All prerequisites for payment of compensation were present at this case: valid insurance policy, including “fire” as insured risk, occurrence of accident fire within the term of validity of the policy, due notification to the insurer, payment of all premium installments, cooperation of the insured party including submission of various types of documents required by the insurer.
However, the insurance company refused to pay any compensation – neither on the Material Damages claim nor on the Business Interruption claim – because in their opinion the PV Park was not properly maintained and the insured party has substantially breached the Bulgarian Code on Insurance, the General Terms of the property insurance, the policy, and the fire safety rules. The breach was allegedly in a direct causal connection with the occurrence and level of the damages to the PV Park. As the fire was a consequence of the non- compliance with the obligations, the insurer had the right to refuse payment as in its view and own interest such breach of the law and the policy was significant: if the insured party complied with its obligations under the fire safety regulations, the fire should not have reached the territory of the PV Park and damaged the solar panels and motors, trackers, cables, etc., interrupting for a certain period of time the proper functioning of the PV Park and decreasing significantly the volume of produced electric energy from the renewable source – the sun.
3.Court Reasoning
The first instance court resolved that the insured party did not breach its obligations as claimed by the insurer. Evident from the collected written and oral evidence the fire started 2.5 km away from the PV Park from unknown source and reached and affected its territory because of random circumstances outside the control of the insured party. The fire fighters, questioned as witnesses, confirmed that August day was extremely hot with strong wind, both factors contributing to the extremely fast fire spread. Worth mentioning, the burst into flames and the fire development were pictured in detail by the calls to 112 emergency number, analysed by the IT expert report.
The major arguments of the insurance company justifying the compensation refusal were related to the existence of abundant grass and other high vegetation under and around the solar panels facilitating the fire spread and intensity within the territory of the PV Park. The insurer claimed that the owner of the PV Park did not cut the grass regularly allowing its overgrowth as well as did not secure a fire protection strip free of vegetation along the fence of the PV Park.
The judge found such arguments as not being supported by the evidence including photos, videos from the surveillance cameras and the testimonies of the witnesses with immediate impressions right before, during and shortly after the fire. The conclusions that the PV Park was properly maintained and that the low grass existing on the ground of the PV Park at the time of the fire was compliant with the fire safety rules were supported also by the annex to the subsequent insurance property policy for the PV Park executed with a respected experienced insurance company. The annex contained a specific requirement that the grass under the solar panels should be kept not higher than 20-25 cm – significantly more than the grass of 5-6 cm present on site on the accident day. Moreover, the presence of a fire protection strip free of vegetation around the PV Park was not mandatory neither under the law nor the technical designs, so no legal obligation was breached by the owner in this regard.
The other assertion of the insurer – that the PV Park owner did not exercise due care during the fire – was also refuted by the evidence. The two guards on duty called 112 regarding the fire long before it reached the PV Park. Once it happened therein, they started extinguishing the fire with the available fire-extinguishers and other suitable means such as shovels doing their best under the circumstances. However, the first fire truck arrived on site hours after the first signals and thus the fire was finally put out late after causing considerable damages to the PV Park not because of the actions of the insured party.
The insurance company also failed to sustain its allegation that the PV Park was not reachable through proper roads for fire safety purposes. The judge correctly deduced that if the specialised vehicles of the fire department arrived at the burning territory of the PV Park and extinguished the fire, then the existing roads were in the normal passable condition. Such fact was confirmed without any doubts by the almost all witnesses and the technical expert reports.
Finally, the judge considered the amount of the compensation to be awarded based on the technical and accounting expert reports. In addition to the business interruption and direct material damages the judge correctly concluded that a compensation should also be paid for all solar modules, motors and trackers equipment being exposed to the extremely high temperatures during the fire. Although operating properly four months after the fire, the fact that the equipment was under the influence of temperatures substantially above those determined in the respective technical characteristics and warranties might result to their malfunctioning or destruction any time in the future.
Conclusion of Bulgarian Lawyers Litigation Team
The right of the insurance company to decline compensation presupposes the correlation between the insured party’s behaviour/ actions and the insured event, the size of the damages and/ or the possibility for their substantiation. In this case no actions of the insured party, such as poor maintenance and lack of due case, causally connected to the occurred risk – fire have been proven and thus, the claim of the insured party was satisfied by the court.
