Still no end to fire insurance dispute between Paldo Vina and Liberty

The burnt-out Paldo Vina factory is a threat to the security of surrounding areas

Since starting operations in Vietnam in 2013, Paldo Vina Limited, which makes instant noodles and is based in Dong Lang Industrial Cluster (IC) in the northern province of Phu Tho’s Phu Ninh district, has bought and repeatedly resigned contracts on compulsory fire insurance and asset insurance against all risks with Liberty Vietnam Limited.

The most recent insurance contract was effective from August 8, 2017 to August 7, 2018.

The fire which led to the dispute occurred on the evening of August 27, 2017 and destroyed all of the company’s factory workspace at Dong Lang IC.

According to a source from Paldo Vina, right after the incident, they were working with Liberty and the organisation tasked with assessing the damage to take the necessary steps.

According to the inspection conclusion of Phu Ninh district’s Investigation Police, the fire came from a sudden disruption in the electrical system. As there was no sign of crime, the case was not sent to the court.

After the fire, Liberty Vietnam showed no intention to refuse paying for the damages.

Ten months later, on June 7, 2018, however, they announced their refusal to issue payments to Paldo Vina, citing Article 17(2d) of the Law on Insurance Business.

On July 2, 2018, Liberty sent a document to Paldo Vina, stating that, “We (Liberty) have gathered evidence to legitimately prove the fact that your company (Paldo Vina)’s fire prevention system did not work at the time the fire occurred.”

Paldo Vina insisted that based on the latest contract signed with Liberty, the insurer has to compensate for the unexpected damage to insured assets caused by risks regulated in the signed insurance contract and related supplemental documents.

In addition, before the contract was signed, Liberty’s staff conducted risk assessments at the Paldo Vina factory where the fire occurred, finding the factory up to standards to be insured.

On August 15, Liberty sent a dispatch to Paldo Vina, affirming their continued refusal of paying the indemnity for the fire, but enclosed a note that, “In case we receive your company’s documents proving that at the time the fire occurred, the factory’s fire prevention system was still working normally, we will revisit the case and issue a suitable decision.”

The dispute has yet to be resolved. In fact, Liberty’s first refusal came late, about 10 months after the fire occurred.

Regarding Liberty’s main argument to refuse compensation, Paldo Vina explained that its fire prevention system was out of order at the time the fire took place because a wall collapsed during a storm and damaged part of the fire prevention system.

Taken separately, the collapsed wall and the partial technical breakdown of the fire prevention system are both covered by the insurance policy signed with Liberty.

In short, Paldo Vina’s argument is that the fire was a case of force majeure, and not the fault of any one party, which is within the scope of the insurance policy.

Each side has its own argument, but the case does not only the related firms. In a recent document sent to Paldo Vina, the Phu Tho Industrial Zones Management Authority—where the Paldo Vina factory is located—said that the damaged factory could collapse anytime, affecting the security of residential quarters in the surrounding areas as well as undermining the general landscape of Dong Lang IC.