The Malhotra Group has secured a significant legal victory and a substantial financial payout after a major insurer unsuccessfully alleged the Newcastle family firm had orchestrated a fraudulent insurance claim.
High Court Dismisses Fraud Allegations
Aviva Insurance Limited has been ordered to pay the care, leisure and property group £660,000 on account of costs after the insurer failed in its attempt to deny coverage for water damage at the New Northumbria Hotel in Jesmond.
The hotel, which remains closed for refurbishment, suffered significant water damage during the Covid-19 lockdown in July 2020. Water escaped from a cold-water storage tank, flooding three storeys of the property and damaging six bedrooms along with the hotel bar and corridor areas.
Legal Battle and Mounting Costs
When the Malhotra Group submitted its insurance claim, Aviva refused payment, alleging that Malhotra Leisure Limited had deliberately caused the flood. The case proceeded to the High Court, with hearings held over several days in November and December 2023.
High Court judge Nigel Cooper KC concluded there was no evidence to support Aviva's case that the flood had been intentionally caused. The judge noted that Aviva continued to pursue fraud allegations through trial despite weaknesses in its case.
As the legal battle progressed, costs escalated dramatically. Malhotra Leisure's expenses exceeded £1.2 million, far above its budgeted costs of £546,730. The court's ruling on indemnity costs means Aviva must bear the burden of these excessive legal expenses.
Serious Allegations Without Foundation
In his judgement, Mr Cooper stated: "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."
He added: "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 escape of water and thereafter lying both to the defendant and to this court."
The judge also noted that Aviva pursued the dishonesty allegations through to the end of trial without pursuing settlement discussions, despite the lack of evidential foundation for the claimed financial motive.
Vindication for Malhotra Group
Following the costs judgement, a spokesperson for the Malhotra Group expressed relief at the outcome: "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."
The ruling represents a comprehensive victory for the Newcastle-based family business against one of the UK's largest insurance providers, setting an important precedent for how insurers handle claims disputes.
