The Malhotra Group has won a six-figure pay out from a major insurer, which unsuccessfully alleged the Newcastle family firm had planned a fraudulent insurance claim.
Aviva Insurance Limited has this week been ordered to pay the care, leisure and property group £660,000 on account of costs, after Aviva failed in its bid to deny coverage for water damage at the New Northumbria Hotel.
The Jesmond hotel, which is currently closed for refurbishment, suffered water damage during the Covid-19 lockdown in July 2020, when water escaped from a cold-water storage tank. The water flooded three storeys of the property and led to damage in six bedrooms as well as the hotel bar and corridor areas. The hotel was closed at the time because of pandemic restrictions.
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However, when the Malhotra Group submitted a claim, Aviva refused to pay, alleging Malhotra Leisure Limited had deliberately caused the flood. High Court hearings, held over several days in November and December 2023, heard how Aviva continued to pursue fraud allegations through trial, despite what the court said were weaknesses in its case.
High Court judge Nigel Cooper KC concluded there was no evidence to support Aviva’s case that the flood had been deliberately caused. As Aviva pursued the trial, the legal costs grew considerably, with Malhotra Leisure’s expenses topping £1.2m, significantly more than its budgeted costs of £546,730. Under costs assessment, the hotel owner would have found it tough to recover the excess but indemnity costs shift the burden to the paying party.
The judgement issued by Mr Cooper says: “The allegations of dishonesty made by the defendant (Aviva) are at the highest level of seriousness, namely that Mr Meenu Malhotra, Mr Atul Malhotra and Mr Vadheera had entered into a fraudulent conspiracy to damage the claimant’s own property and thereafter defraud the defendant of a payment. Allied to these allegations were necessary further allegations that each of these individuals had lied to the defendant during the defendant’s investigation of the loss and also lied to this court in their evidence.
“There is no good evidence of a financial motive sufficient to explain why Meenu or anyone else would engage in serious criminal misconduct both in causing a deliberate EOW (escape of water) and thereafter lying both to the defendant and to this court.”
He added: “The allegations of dishonesty made by the defendant were pursued through to the end of trial without the opportunity for settlement discussions being pursued. The pleaded motive for the dishonesty was financial. But the evidence provided no good evidential foundation to establish this motive.”
Following the costs judgement, a spokesperson for the Malhotra Group said: “We are pleased to have finally received this judgement vindicating Malhotra Group and its directors. This has been an extremely stressful experience and we hope that through this judgement insurance companies will be addressing their policy holders with more compassion and care.”