Peabody Trust v National House-Building Council

For limitation purposes, an insurance claim accrues according to the insured peril identified by construing the policy. Where cover responds to the insured having to pay more to complete works because of a contractor’s insolvency, the insolvency is a cause of the loss, not necessarily the insured event itself. Time therefore does not automatically run from the insolvency date. It runs when the insured loss specified by the policy occurs, subject to the contractual wording.

Additional cover for reasonable precautions to secure the site may constitute separate cover with a separate cause of action. On a summary judgment application, the defendant must give fair notice of the case relied upon. The court need not determine a late, fact-sensitive alternative limitation case where the evidence and hearing arrangements make summary determination unfair or unsuitable.

Peabody Trust claimed under NHBC insurance policies after the insolvency of the contractor engaged to construct affordable housing. The claim included the reasonable extra cost of completing the units and site-security expenses.

NHBC applied for summary judgment or strike-out, arguing that the six-year limitation period under Limitation Act 1980, section 5, began when the contractor entered administration on 29 June 2016. NHBC later advanced alternative arguments based on the date when the insured allegedly had to pay more and on site-security costs incurred in 2016.

The central issue was whether the contractor’s insolvency itself was the insured peril, or whether the relevant peril was the insured having to pay more to complete the works because of that insolvency.

The application was dismissed.

1. Accrual of the main claim. A contractual claim under section 5 of the Limitation Act 1980 ordinarily runs from breach. In an indemnity policy, breach occurs when the insured peril occurs, but the insured peril must be identified by construing the policy.
2. Construction of Option 1. The policy covered the insured where it had to pay more to complete the homes, or had lost money paid to the contractor, because of insolvency or fraud. The insolvency or fraud was a causative condition. It was not, by itself, the insured peril. The wording made the insured loss an essential part of the insuring clause, rather than merely an issue of quantum.
3. The defined insolvency events might occur without any additional completion cost or lost payment. It would therefore be commercially inappropriate to treat the claim as accruing automatically on insolvency. The limitation period for the principal claim began when Peabody had to pay more to complete the units because of the insolvency, a question to be determined at trial.
4. Summary disposal. Although the claimant bears the ultimate burden of showing that its claim is in time, the defendant must fairly identify the limitation case relied upon. The court was not required to determine NHBC’s late alternative case, which involved disputed facts, incomplete evidence, potentially expert analysis and insufficient hearing time.
5. Site-security cover. The provision for reasonable precautions to secure the works was additional and separate cover. A limitation bar affecting that cover would not, without more, bar the principal claim for extra completion costs. The court was not satisfied on the evidence that the site-security claim was time-barred and declined to determine the further mitigation-cost argument.

Consequential matters were adjourned unless the parties agreed an order.