This case study is an anonymised composite based on publicly reported commercial insurance claim patterns. It is not actual Apex client data and does not constitute legal or insurance advice. Names, locations and identifying details have been changed. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority, FRN 724952.
An independent prestige used-car specialist in Somerset, around 35 vehicles on display in a converted agricultural building with an attached service workshop. Average forecourt value £1.4m. Turnover £4.2m. The business specialises in collector cars and high-end German and Italian vehicles, holds an OFT/FCA consumer credit broking permission for finance introductions, and runs a small detailing and minor mechanical service operation in the attached workshop, which also hosts customer servicing for an established repeat clientele.
On a Sunday in late autumn, a fire broke out in the service workshop and spread to the attached display building. Fire and Rescue attended within eleven minutes of the 999 call from a passing motorist who saw flames through the workshop roof, but the timber-framed display building was substantially destroyed before the fire could be contained. Twenty-six vehicles in the display building were total losses, including six vehicles owned outright by the business, four part-exchange units, twelve consignment vehicles (owned by private customers and held by the dealership for sale), and four customer vehicles in for service over the weekend.
The Fire and Rescue Service investigation concluded that the fire had originated in the workshop area near a battery charger that had been left running on a high-performance car undergoing a recommissioning service. The exact ignition mechanism could not be definitively determined but the most probable cause was identified as a battery thermal event triggering ignition of fuel vapour, paper and absorbent materials in the adjacent area. The investigation did not find evidence of arson and did not find evidence of any electrical fault in the building’s wiring.
The dealership owner reported the loss to the broker on the Monday morning. The premises had been closed and unattended since Saturday afternoon. Recent investments had included an upgrade of the intruder alarm and CCTV but the fire detection system, while compliant with the requirements at the time of original installation, was not linked to an alarm receiving centre and there had been no detection during the unattended period.
The first-party material damage and business interruption claim from the dealership ran to approximately £4.8m: building reinstatement at £1.6m (the structure was rebuilt to current building regulations standard rather than restored), forecourt stock at £1.2m, workshop equipment at £180,000, business interruption over a fifteen-month rebuild and ramp-up period at £1.7m, professional fees, additional cost of working and debris removal at £140,000.
The third-party claims from customers whose vehicles were held in care, custody and control (CCC) ran to approximately £820,000 across twelve consignment vehicles and four service customers. Several of the consignment vehicles were classic or collector cars whose agreed value substantially exceeded their open-market trade value, and the consignment agreements with the dealership included an agreed value reflecting recent independent valuations.
A subrogated claim was anticipated from the battery charger manufacturer’s product liability insurer, but the precise ignition mechanism was never definitively established and that subrogation route was ultimately not pursued.
The motor trade combined policy contained four relevant sections. The material damage section covered the building and stock; the business interruption section covered loss of gross profit and increased cost of working; the road risks / vehicles in care, custody and control section covered customer vehicles held for sale or service; and the combined liability section covered any third-party liability allegation against the dealership for negligence in its handling of customer property.
The material damage and BI sections responded substantially as expected. The building was reinstated on a “reinstatement as new” basis with the insurer accepting the costs of compliance with current Building Regulations and the Building Safety Act 2022 where applicable to the rebuild. The BI calculation required careful work to establish gross profit, indemnity period and the rebuild timeline; the indemnity period was twenty-four months which proved sufficient.
The CCC section responded on the customer vehicles. The dealership’s consignment agreements specified that the dealership held vehicles “at the consignor’s risk save in respect of loss or damage caused by the negligence of the dealership”. The fire investigation report attributed the ignition to activity in the workshop and the insurer accepted that this engaged the dealership’s CCC cover regardless of whether negligence could be specifically established. The agreed-value provisions in the consignment agreements were honoured, with two minor disputes resolved by reference to recent auction comparables and independent valuation.
The combined liability section did not respond — the CCC section provided cover on a first-party basis and the third-party negligence allegations were not pursued separately by the consignment customers given the agreed CCC settlements.
Total claim cost across all sections, before subrogation, was approximately £5.6m. The dealership reopened in a temporary unit nine months after the fire and moved into the rebuilt premises at month sixteen. The renewal premium increased by 84% and the material damage cover was rewritten with a £25,000 each-and-every-loss excess, a condition precedent requiring an automatic fire detection system linked to an alarm receiving centre, and an exclusion for damage arising from battery charging operations conducted outside designated and fire-rated charging areas.
There was no enforcement action by Fire and Rescue or the local authority — the building had been compliant at the time of original certification and the fire originated from a transient activity rather than a building defect. The business survived; one of the consignment customers, a long-standing client who had lost a vintage Ferrari in the fire, became one of the dealership’s largest post-rebuild customers.
Premises fires at motor traders are a low-frequency, very-high-severity exposure that touches almost every section of the policy at once. First, the distinction between vehicles owned by the dealership and vehicles in CCC is fundamental — the cover sections respond differently and the claim has to be assembled accordingly. Second, consignment agreements should specify whether the dealership carries the loss exposure or whether the consignor’s own insurance is intended to respond; in practice CCC cover is the cleaner answer. Third, agreed-value provisions in consignment agreements need to be evidenced contemporaneously — recent independent valuations are the documentation that settles disputes. Fourth, battery charging, fuel decanting and detailing operations all carry well-known ignition risks; designated fire-rated areas with automatic detection are increasingly conditions of cover, not best practice. Fifth, the business interruption indemnity period should reflect the realistic rebuild-plus-ramp-up timeline for the specific business model — twelve months is rarely enough on a prestige used-car operation.
We would have audited the fire detection arrangement and the consignment agreement wording at the previous renewal and flagged both as known exposures that the insurer would react to after any loss. At notification, we would have coordinated the deployment of a forensic fire investigator and a chartered loss adjuster acting for the policyholder in parallel with the insurer’s appointments — having an independent investigator on site early is the difference between a clean cause-determination and an extended argument. We would also have worked with the dealership owner on the customer-communications response, which is the single most important post-fire workstream for preserving long-term consignment relationships.
For the underlying cover, see our Motor trade insurance hub.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
Get a quote