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Construct All Risks Insurance Policy: Period of Insurance (UK)

21 December 2023 Donald Dinnie, Norton Rose Fulbright

One of the issues in this judgment in dispute was whether the indemnity included loss and damage occurring after the end of the period of insurance or if the loss or damage began within the period of insurance and developed thereafter.  The insurers argued that coverage was restricted to actual damage occurring during the period of insurance. 

The court held that any loss sustained after the period of insurance was irrecoverable. 

The insured’s global central headquarters in London had what was set to be the largest timber flat roof in Europe.  It consisted of a series of laminated timber beams. 

The roof consisted of laminated timber beams bearing nearly 500 cassettes.  The cassettes were constructed of a soft timber frame with a gap filled with mineral wool insulation.  They included a lightwell allowing natural light to enter the building.

During installation the cassettes were left waiting for permanent waterproofing.  The delay was foreseeable in that it was necessary to install a safety perimeter fence to protect workers on the roof from falling.  It was also foreseeable that there would be substantial rainfall before patching of the cassettes could be completed and significant flow and collation of water.  No temporary weather protection was provided. 

Subsequently, standing water was found inside the gutter compartments of the majority of the cassettes.  Drying out was attempted with partial success.  The entry and accumulation of the water led to swelling, decay and loss of strength of the component wood boarding of the cassettes. 

On the insured’s case the problem was the result of a single cause, a fundamental flaw in the design of the roof by failure to erect a temporary roof to protect the partially installed cassettes.

It was common ground that the construction contract was part of the factual matrix for the construction of the policy. 

The risk insured was “physical loss or damage to Property Insured, occurring during the Period of Insurance, from any cause …”.  That applied to the initial period of insurance.  As regards the maintenance period, cover was “solely in respect of physical loss and damage to the Property Insured occurring as a result of: (i) a cause occurring prior to the commencement of the Maintenance Period or, (ii) operations carried out by any contractor or subcontractor for the purpose of complying with the conditions … governing the execution of their contracts or subcontracts …”.

The basis of settlement was: ‘the full cost of repairing, reinstating or replacing property lost or damaged (including the costs of any additional operational testing, commissioning as a result of the physical loss or damage which is indemnifiable hereunder) even though such costs may vary from the original construction costs …”.

 The court said that the insured’s reliance on a series of marine judgments that dealt with damage which occurred during the period of insurance, but the extent of the damage had not been ascertained until after the expiry of the policy and were distinguishable. 

Sky UK Limited v Riverstone Management Agency Limited

First published by: Financial Institutions Legal Snapshot

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