National House Building Council v Peabody Trust

Where an insurance policy covers an employer who has to pay more to complete works because a contractor becomes insolvent or commits fraud, the insolvency or fraud is a causal condition, not itself the insured event. Accrual requires the contractual financial-loss condition and the causal link. Insolvency alone therefore does not start limitation. Whether the condition is satisfied by actual or foreseeable extra expenditure depends on the policy wording and may require evidence. Contractual language controls the analysis; commercial consequences may inform interpretation but cannot replace the natural meaning or rewrite the bargain. A separate provision for security costs may create a distinct cause of action with a separate limitation position.

NHBC appealed against the dismissal of its application to strike out, or obtain reverse summary judgment on, Peabody’s claim under an insolvency insurance policy. The contractor became insolvent in 2016 and the homes were completed in 2021. NHBC argued that the cause of action accrued on insolvency and was therefore barred by the six-year limitation period. Peabody contended that accrual occurred only when it had to pay more to complete the homes.

The judge, Andrew Mitchell KC sitting as a Deputy High Court Judge, held in [2024] EWHC 2063 (TCC) that insolvency did not automatically trigger the cause of action, but left open whether the claim was nevertheless time-barred on another accrual date. The appeal concerned that construction, the judge’s case-management decision, and the separate claim for site-security costs.

The appeal was dismissed unanimously. Coulson LJ gave the lead judgment. Moylan LJ agreed with both judgments, and Lewison LJ agreed with the result and added a concurring analysis of the policy wording.

1. Case management and scope. The judge was entitled to confine the interlocutory hearing to the discrete insolvency point. The alternative argument was raised late, might require further evidence, and could not fairly be determined within the available time. Since that alternative issue had not been decided below, it was inappropriate for the Court of Appeal to determine it de novo. Grounds 3 and 4 therefore failed.
2. Construction of Option 1. The wording required both a financial event—losing sums paid to the contractor or having to pay more to complete the homes—and causation by the contractor’s insolvency or fraud. The insolvency or fraud was not itself the insured event. The headings and notification provision did not alter that conclusion, and the fraud limb made NHBC’s construction especially implausible because the insured might not know of the fraud when it occurred. The policy was materially different from conventional property-damage insurance considered in Callaghan, Kelly and Harrison. British Credit Trust illustrated that policy wording may postpone accrual until the insured knows that a recoverable loss exists and can identify it. The natural and commercially realistic construction was that the cause of action accrued when the contractual requirement to have to pay more was satisfied, although the precise meaning of that requirement remained for determination.
3. Limitation. The claimant bears the burden of showing that a claim is not statute-barred once limitation is raised. NHBC had not established that the claim accrued on insolvency, but the judge had not found that Peabody had discharged its burden. The remaining limitation issues were left for trial. General policy favouring speedy accrual could not override the wording of the policy.
4. Site-security costs. The D1 security-cost provision supplied separate cover and a separate cause of action from the principal Option 1 claim. Its limitation position therefore had to be considered separately. The material suggested a prima facie limitation defence, but the evidence was insufficient for the appellate court to determine it. Bann Carraig was distinguished as a property-policy case. Ground 5 failed.

The remaining limitation issues, including the separate security-cost claim, remained to be decided.

1. Court of Appeal (Civil Division). In [2025] EWCA Civ 932 , the court unanimously dismissed NHBC’s appeal.
2. High Court of Justice, Technology and Construction Court. In [2024] EWHC 2063 (TCC) , the judge dismissed NHBC’s strike-out and reverse-summary-judgment application, holding that the cause of action did not accrue automatically on the contractor’s insolvency and leaving the remaining limitation issues for trial.