'TOWIE effect' plagues fire business interruption row

The ‘TOWIE effect’ phenomenon is at the centre of an intricate £2.2 million High Court insurance row triggered by a blaze that ripped through a nightclub at the heart of the popular TV show five years ago.

The case – now being heard before a High Court judge – stems from the fire that destroyed a wing of Brentwood’s Sugar Hut Club in September 2009, a year before The Only Way is Essex (TOWIE) was launched in 2010.

Although the “scripted reality” TV show was no more than a glimmer in its creators’ eyes at the time of the blaze, it has become one of the key factors in this court battle between the nightclub’s owners and insurance brokers, AJ Insurance Service, who are in dispute over the financial fallout from the fire.

Sugar Hut initially sued its insurers over their refusal to pay out under the policy, but that claim was rejected by a judge in October 2010 on the basis of “non-disclosure before inception of the insurance policy”.

The company in turn sued AJ Insurance, on the basis that the brokers let them down when dealing with the company’s insurers.

In May last year, AJ Insurance agreed to settle Sugar Hut’s claim by paying 65% of its losses.

The case has now returned to court for an assessment of the amount of compensation due to the group.

Sugar Hut seeks compensation under a number of different headings – the most costly being “business interruption losses”, which it puts at around £1.3million.

The broker has agreed to pay 65% of Sugar Hut’s £310,000 property damage claim and 65% of the £573,136 it ran up in legal costs in its unsuccessful claim against the insurers.

However, the court heard that the principle area of dispute concerns the group’s business interruption losses.

Sugar Hut was claiming 65% of £1,345,794 for business interruption, but the brokers valued the claim “at no higher than £385,776”.

AJ Insurance had made interim payments to Sugar Hut totalling more than £800,000 pending the final assessment of its award.

Richard Slade QC, for Sugar Hut Group Ltd and four other related companies, said TOWIE had become “one of the complicating factors” in assessing compensation owed to his clients over the physical devastation and economic consequences of the fire.

Expert loss adjusters on behalf of Sugar Hut Group insist that the business was on an upward trajectory in terms of its potential turnover at the time, but Slade said experts on the other side would challenge that view.

And the barrister explained that the “TOWIE effect” had muddied the waters in terms of quantifying the loss because it was hard to know whether the show had overall contributed to a “beneficial effect on the Club’s turnover”.

He told the judge: “The claimants do not dispute that, over time, TOWIE made the club and the Sugar Hut Club brand more famous.

“It increased the number of guests coming through the doors. However, it does not follow that as a result of TOWIE the club has been hitting levels of turnover which could not have been achieved in other ways between September 2009 and August 2010.

“Even without TOWIE, the club would have increased the number of big spenders and increased its capacity.”

The club’s local customer base had in fact “weakened” since 2009, said the barrister, adding: “In terms of turnover, the effects of TOWIE have not been measurably beneficial to the club.

“Visitors attracted by TOWIE are celeb-spotters – not big spenders. The average spend per head has been reduced since TOWIE. “

The protracted litigation kicked off after Sugar Hut Group’s insurers “declined to indemnify” it over the fire damage, said defence counsel Angus Piper, alleging “material non-disclosure” of relevant facts or a failure to comply with the conditions of the insurance policy.

The Sugar Hut was out of business for nearly a year after the blaze – the precise cause of which remains a mystery, although Essex’s fire investigator concluded that the cause was not accidental but was started “by heat source and combustibles brought together deliberately”.

The hearing continues.