Major parsley producer wins at least £2.38m after factory fire exposes insurance risks facing British manufacturers

Camstar Herbs Limited, one of the largest producers of dried parsley globally, has won at least £2.38 million in a legal battle highlighting significant insurance vulnerabilities for British manufacturers. The firm secured a full damages award of £1.249 million from the High Court, following a claim against Advisory Insurance Brokers Limited, trading as Morgan Law Insurance Brokers. This award, alongside interest and additional costs, brings the total recovery to £2.38 million after a catastrophic fire disrupted operations at one of its processing facilities in Suffolk.

The incident, which occurred in August 2021, affected approximately 60% of Camstar's production capacity. Although the company managed to recover some costs from its insurance, it faced substantial ongoing financial obligations to growers and contractors crucial for maintaining its supply chain. The issue stemmed from a recommendation by the broker in 2018 to switch to a cheaper but less comprehensive insurance policy. This change, although saving the company £7,000 in annual premiums, left it without coverage for essential payments during the business interruption.

His Honour Judge Bird ruled that the broker had neglected its duty by failing to adequately explain the implications of the policy change to Camstar. The court dismissed claims that the payments could have been recuperated under the proposed policy as an increased cost of working, emphasising the mismatch between Camstar's operational needs and the insurance coverage it secured.

Oliver Pannell, Partner in the Insurance Disputes team at Edwin Coe, stated that this case should serve as a significant alert to British manufacturers about the intricacies of their insurance agreements, stating “a factory fire can stop production overnight, but it doesn't mean a business can simply stop paying its suppliers and contractors.” He highlighted that any savings attained by opting for cheaper policies might lead to substantial losses if they do not adequately reflect the business's financial realities.

Edward Starke, Chief Executive and Managing Director at Camstar, shared the emotional toll the incident took on the family business, remarking, “the last thing we expected was to discover that payments to [...] our most important suppliers [...] weren't covered by our insurance.” He reflected on the extensive challenges faced during the trial process and is relieved with the successful outcome.

With the court's further orders, including £360,492 in interest and an additional £75,000 due to Camstar’s Part 36 offer, Camstar has set a precedent highlighting the critical need for better comprehension of insurance policies among manufacturers. As the case signifies, understanding the nuances of business interruption insurance and the potential gaps in coverage is essential for sustaining operations in times of crisis.