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Legal case

Limitation period for making a claim under a building guarantee policy

Griffiths and another v Liberty Syndicate 4472 [2020] EWHC 948 (TCC)

Griffiths and another v Liberty Syndicate 4472 [2020] EWHC 948 (TCC)

In a recent decision, the High Court has granted an insurer’s application to strike out a claim made under a building guarantee policy on the basis that it was statute barred under s. 5 of the Limitation Act 1980. The limitation period started to run from the date when the damage to the building occurred.

The facts

In this case, the claimant was a resident of a flat in a large residential development. The resident’s building guarantee provided cover for, amongst other things, defects in common parts of the building. The policy expired on 3rd October 2020. Damage to the common parts was identified on or about the 5th July 2009 and notified to insurers in March 2010, but was rejected by the insurer in 2011. The claimant issued proceedings on 4th January 2019. It was common ground that if the cause of action arose prior to the 5th January 2013, it would be statute barred.

The claimant argued that liability only began to accrue under the policy when the property owners had begun to incur costs for the necessary remedial works of rectification (which they had yet to do). Alternatively, there was a continuing obligation to indemnify. Those contentions were rejected.

The decision

As the building guarantee was an indemnity policy, the limitation period commenced as soon as the loss occurred and not when the claim under the policy was subsequently rejected (as per Callaghan v Dominion Insurance Co [1997] 2 Lloyd's Rep 541). The judge emphasised that clear wording would be required to alter such an interpretation, but that there was no such wording in the policy. The claimant’s contention would result in the claimant being able to control the date upon which the limitation period commenced by deciding not to carry out works, contrary to the principle in LSE v Henthorne [2011] EWCA Civ 1415.

The claimant’s contention would defeat the purpose of insurance. The judge cited the decision in Manchikalapati v Zurich Insurance plc (t/a Zurich Building Guarantee & Zurich Municipal) and others [2019] EWCA Civ 2163, in which the Court of Appeal rejected an argument that liability under a similar building guarantee arose when costs had been incurred, as that would allow insurers to avoid liability to impecunious residents.

Finally, the judge held that liability was triggered once notice of the claim had been given within the policy period in accordance with the policy conditions. A cause of action could only arise once.

Summary

This decision provides useful clarity on when the limitation period for a claim under similar building guarantees will commence. Policy holders will be unable to indefinitely defer the commencement of the limitation period and will need to progress claims expeditiously.

If you would like to discuss anything further please liaise with your usual contact in the Weightmans construction team or speak to Chris Doran at chris.doran@weightmans.com or Camelia Nesari at camelia.nesari@weightmans.com.

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