Isobel June Dobson died at Hessle Common Lane Farm in Wragby, on September 30, 2011.
She was sat in the back of a van alongside her younger sister Sarah, then aged one, when a fire which was deliberately started in a hay barn spread rapidly and engulfed the vehicle.
Terry Webb rescued Sarah but was unable to reach little Isobel in time and she died from the effects of smoke and fire.
He was arrested shortly afterwards on suspicion of murder and attempted murder but the case was dropped by the Crime Prosecution Service after they said there was not enough evidence to charge Webb.
During the inquest, Coroner David Hinchliff said he believed the police theory that Webb started the fire, not to harm or kill the children, but so he could rescue them and be hailed a hero.
Mr Hinchliff branded Webb a “pathological liar” who had invented a military career and claimed he had suffered post-traumatic distress syndrome after serving in Bosnia, Afghanistan and Iraq.
Concluding an inquest into her death on Wednesday, Mr Hinchliff recorded a narrative verdict.
He said: “The fire was deliberately started by a person or persons whose motive for doing so cannot be determined from the available evidence. I therefore record a verdict in those terms.
“As I have said throughout, the theory is as stated, although that cannot be proved to the requisite standard. I personally, from the evidence I have heard, have no reason to think that the police’s theory is in any way far fetched or unjustified. I think their theory is correct. If the evidence was able to support it to the required standard, that indeed would be my finding.”