Insurers ordered to pay Sartex Quilts over £1.3 million in compensation

An insurance company has been ordered to compensate Rochdale business Sartex Quilts on a reinstatement basis for property destroyed in a fire.

In May 2011, Sartex Quilts and Textiles’ building on Norwich Street, Crossfield Works, was destroyed in a huge fire which killed factory worker Mohamed Shakil Aboo. The fire started after a baling machine, which recycles clothing into underlay, became blocked.

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The buildings were severely damaged during the fire, with the plant and machinery destroyed.

Sartex Quilts and Textiles was incorporated in 1992 by Maqbool Ahmed, his brother, Saleem Khalid, and cousins, Iftikhar Ahmed and Zulfiqar Ali.

In 1999, Sartex purchased larger premises at Castle Mill, Queensway, where it then moved the majority of its production.

From around this time, Crossfield Works was used primarily for storage, and for the re-packing of linens imported from Pakistan, before creating felted shoddy hard pads from shredded rags and fibres.

Sartex insured Crossfield Works in November 2010: sums insured for the buildings, plant and machinery were based on the-then estimated costs of reinstating them.

Sartex, which manufactures home textiles, bed linen and quilts, made a claim under its Property Loss or Damage Policy for material damage and business interruption after the fire.

Liability was accepted by insurers in October 2011, however the basis for valuing the damage was disputed. 

After a ruling was made by the High Court of Justice in March 2019, the insurers have been ordered to pay the textiles business over £1.3 million, after deducting a 20% co-insurance provision.

The textiles company had sought compensation relating to demolition and rebuilding costs (the reinstatement value), whereas the insurers argued that the damages should be assessed on a market value basis – the amount received if sold.

The court reviewed Sartex’s actions around the time of the fire and in the intervening eight-year period up to the trial, including its intentions to reinstate the premises, and ruled payment be made on a reinstatement basis.

Mr David Railton QC, sitting as a Deputy High Court Judge, ruled: “Sartex is entitled to be indemnified on the reinstatement basis in respect of the buildings, plant and machinery which were damaged or destroyed in the fire at Crossfield Works on 25 May 2011.

“Its claim in respect of the buildings is not subject to any deduction for betterment.

“I also conclude that Sartex's insurance was at the time of the fire subject to a 20% co-insurance provision, and that its claim for indemnity in respect of the buildings, plant and machinery is to be reduced accordingly.”

A representative for Sartex said: “We are pleased with the High Court decision.”