NHBC loses appeal in Peabody insurance claim case

The Court of Appeal has upheld a High Court ruling in favour of Peabody in a dispute with the National House Building Council (NHBC).

Last August, a judge rejected the National House Building Council’s (NHBC) argument that the 108,000-home housing association had left it too late to bring an insurance claim.

The NHBC appealed against the decision, but a new judgement handed down on Monday (21 July) dismissed its case.

The case concerned a housing scheme in Bedfordshire, which NHBC had insured on behalf of housing association Catalyst, which has since merged with Peabody.

Contractor Vantage was appointed in 2015 to build the 175-home development for £24m, with the sum for the affordable component worth a little over £10m. However, it went into administration the following June.

Under its insurance policy, Catalyst was covered if it had to pay more to complete the units because of insolvency. 

A claim was ultimately issued in July 2023, when Peabody requested £914,000 plus interest, but NHBC’s legal team argued that it was statute-barred by virtue of six years having passed since the administration. 

While it asserted that the cause of action ‘based on the insolvency of Vantage’ would have accrued on the date of insolvency, Peabody disagreed, holding that the cause of action accrued on the date on which Catalyst had to pay more for the relevant units to be completed.

NHBC was represented by BP Collins and Peabody by Devonshires.

“The judgment confirms that when determining the cause of action under policies of indemnity, it is crucial to identify the risk or event that is insured against,” said Devonshires in a blog post on the case.

“That is consistent with the well-established principle that a cause of action under an insurance policy accrues on the happening of the event insured against. 

“In this case, Peabody was not insured only against contractor insolvency; Peabody was insured against the risk of the contractor becoming insolvent and Peabody having to pay more to complete the new homes.” 

Ian McDermott, chief executive of Peabody, posted on the social media platform LinkedIn that the judgement was an “excellent result”. 

“We do not comment on litigation matters,” an NHBC spokesperson told Housing Today.

  A Peabody spokesperson said: “We’re pleased with the court’s decision.”