Fahad Atta v HDI Global Specialty SE

Under liability insurance providing cover for damage occurring during the policy period, the critical question is when the damage was caused, rather than when it was discovered. Allocation of progressive damage between successive policy periods is principally a factual evaluation for the trial judge, particularly where the evidence shows that significant damage occurred during the relevant period and later deterioration did not materially increase the cost of repair.

Repair costs, including the removal of an improperly installed product, may be liabilities for or arising out of insured physical damage where removal is necessary to restore the property. A possible contractual remedy does not prevent a concurrent tortious liability arising when physical damage occurs. Public-liability and product-liability sections containing mutually exclusive cover must be construed by reference to their precise wording.

The claimant sought indemnity from insurers under the Third Parties (Rights Against Insurers) Act 1930 after Heatwave Energy Solutions Limited, which had installed cavity wall insulation at his home, entered liquidation. The trial judge found negligent installation, physical damage to the property, and liability for remedial works costing £34,000. He concluded that the relevant damage occurred during HDI’s policy period, although some progression followed, and dismissed the claims against the other insurers.

HDI appealed on the construction of the public-liability and product-liability sections, the recoverability of the insulation-removal costs, and the allocation of damage between policy periods.

1. Appeal dismissed. The trial judge’s order requiring HDI to indemnify Heatwave for £34,000 was upheld.
2. The distinction between the public-liability and product-liability sections did not affect the result because the arguments on the other grounds applied equally to both sections. Jacobs J nevertheless considered that the claim had considerable force as a product-liability claim. The words “in connection with any Product” were broad enough to encompass negligent misuse or installation of an otherwise sound product. The two sections were mutually exclusive, so their precise terms required careful attention. This observation was made without full argument from the claimant and was not necessary to the result.
3. The trial judge was entitled to treat the allocation of damage between policy periods as a factual, or jury, question. The relevant issue was when physical damage was caused, not when it became visible or was discovered. The judge had considered the possibility of progressive damage and was entitled, on the evidence as a whole, to find that significant damage occurred during HDI’s period and that later progression did not materially increase the cost of the necessary refurbishment.
4. The cost of removing the cavity wall insulation was covered. The house had suffered physical damage to its fabric, and effective reinstatement required removal of the insulation. That liability was for, or at least arose out of, damage occurring during the policy period. It was not merely a cost incurred in anticipation of future damage or a claim for pure economic loss.
5. A possible pre-existing contractual liability to remove the insulation did not exclude the concurrent tortious liability arising when the house was physically damaged. The reasoning in Horbury Building Systems v Hampden Insurance did not require a different conclusion because that case concerned economic consequences extending beyond the physically damaged property.

1. High Court (King’s Bench Division): Appeal from the decision of Mr Recorder Berkley KC dismissed. The trial judgment and £34,000 indemnity award were upheld.