ABC Limited operates an import$/$export business with an annual turnover of $7$ million. ABC

has a commercial policy with XY DAC that includes cover for theft and fire. Due to the high

value contents stored in its depot, there is a warranty that requires that ABC$$s alarm must be

linked to a central control and monitored $24$ hours per day. The policy also prohibits the storage

of explosives.

ABC reports to XY DAC that a fire broke out at the premises and caused extensive damage

to its stock and the buildings. ABC has a mortgage on the property and the interest of the

mortgage$-$holder is noted under the policy. XY DAC$$s enquiries establish that the alarm had

been broken for a number of weeks before the fire and was not monitored at the time of the

loss. In addition, when the loss adjuster visited the property, they discover that ABC had been

storing fireworks for a forthcoming party that the company was arranging.

a$)$ Discuss whether ABC$$s claim for fire damage is likely to be covered.$(7$ marks$)$

b$)$ Explain, with justification, how ABC storing fireworks effects the validity of its policy.$(7$ marks$)$

c$)$ Discuss the validity of the mortgage$-$holder$$s claim for damage to the buildings.$|(6$ marks$)$