By Yitong Guo


We are delighted to have started 2023 with a successful settlement involving a seven-figure insurance claim.


This case involved us assisting a commercial landlord client on their insurance claim for an insured risk. We managed to secure full insurance payment from the landlord’s insurer despite the tenant’s alleged entitlement of such payment. During the negotiation process, we successfully assisted the parties to reach full settlement on the lease dispute and the insurance claim. Not only that, but we also assisted our client to sell their freehold interest (with a burnt site in situ) to a third party, as part of the settlement deal.


The caseworker for this case was Yitong Guo (Solicitor), while the case was led by Evveline Loh (Litigation Supervisor). Keep reading to learn more about the case.





Our client, the landlord, is a company registered in the UK who held the freehold interest. The landlord had let two commercial units to the tenant on a short commercial lease agreement: one with a written commercial lease – unit A, while the other occupancy was entered through oral agreement – unit B.


Unit A was completely burnt to the ground due to a fire incident, while Unit B was able to continue to function despite minor disruptions. Hence, the tenant was able to continue to occupy the site while our client’s insurer compensated the tenant part rent and cost to connect the electric power.


Our client in the first instance (Unit A) proceeded to make an insurance claim for the insured risk and received a cash settlement offer from their insurer.


The tenant heard about the settlement and sent a pre-action letter to the client and their insurer threatening to take legal action and claiming they were entitled to a portion of the cash settlement for reinstatement of unit A. Numerous threats were outlined in their pre-action letter.




Our client was faced with several complex issues and the suitable resolution would require both legal consideration as well as commercial rationales.


1. Does it make commercial sense?


The most important point to our client is whether any settlement proposed would make any commercial rationale: does it make commercial sense to reinstate the unit and continue the lease?


This placed further questions as to whether the cash payment justified the costs of reinstatement, including:


  • Would the client make a loss if they were to proceed to reinstate the site?
  • What is the time scale for such reinstatement work to be carried out?
  • Will there be planning and building regulation obstacles?


2. What is the legal position as a commercial landlord?


In usual circumstances, it is indeed the landlord’s obligation to reinstate the premises (and/or the building as appropriate) following damage by an insured risk. However, in this case the question must be asked: was the client obliged to reinstate even if it would be impossible or impractical to do so? The apportionment of the tenant’s entitlement of the cash settlement was also an issue if the client was preparing to accept the pay-out.


3. Insurance


Was the settlement amount justifiable? Would the tenant be entitled to apportionment of the cash settlement?




On reviewing the lease agreement and insurance policy, we considered that although there might be different options for our client, the sticking issues here were the practicality of rebuilding unit A and to renew the lease as a landlord; and whether to sell the site without reinstating the unit and accept the amount of the cash settlement.


In order to answer these questions, we engaged and worked with a valuation assessor, quantity surveyor, and specialist legal counsel who provided expert reports on the separate issues in question. We had fully reviewed the lease, the insurance policy and the relevant laws and concluded that the lease clause did provide an option for termination of the lease if reinstating the burnt unit proved to be impossible or impractical, and the client might be in a strong position to do so with the supporting data.


Given we had sufficient evidence needed to advise our client on the legal practicality of the reinstatement of unit A and the likely outcome and risk on lease renewal as well as termination, our client was able to make an informed decision in relation to the above issues. We proceeded to action on our advice with an outlook to settle the dispute with the tenant, release our client’s obligation as landlord to reinstate the site, negotiate a sale of both unit A and B and restrict the tenant’s claim on the insurance settlement sum.


During our negotiation with the insurance company, there were a few points raised but what was more concerning was under-insurance.


Satisfying result


The negotiation was not easy. The first offer received in front us was for our client to transfer the site for no consideration to the tenant and to pay an apportionment from the insurance pay-out.


However, the end result was a satisfying one. After several rounds of negotiation, we manged to secure a full settlement on every aspect of the dispute: Our client’s obligation as landlord to reinstate was released; the site with the burnt down unit was sold at a competitive price as part of a larger scale corporate transaction, (thanks to our firm’s conveyancing expertise, we also acted for the client on this transaction). The insurance claim was successful and our client has received full pay-out with no deduction for any apportionment to the tenant. Should this matter have proceeded to court it would have cost our client considerable amount of legal fees and would have certainly carried more risks for the client.




This case truly reflects the skills we have in our team and our ability to focus on both the legal and commercial aspects. Our firm will always act in our client’s best interest. Our team possesses a rounded and coordinated skillset and our firm’s service to our clients goes beyond our legal expertise.


We strongly advise parties in dispute to try their best to resolve the issues before entering legal action. For their own benefit, court proceedings should be the last recourse to consider.


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