Ghazala Khalid is a member of our Property Risks & Coverage Special Interest Group on Insurance and Reinsurance and shares her thoughts on an important case from last year.
This week we consider the judgment in Atta v HDI Global Specialty SE [2023] and highlight one of the grounds of appeal, which concerned the timing of the damage.
In this case the insured defendant company was in liquidation. The claim made by the claimant, in respect of problems encountered as a result of the defendant company’s work, was brought under the Third Parties (Rights Against Insurers) Act 1930 against a number of the company’s insurers. Each policy ran for a period of 12 months and the material policy under consideration in the appeal expired on 27 July 2014. The issue of when damage was caused, and its progression was a significant issue in the case and the trial judge had no evidence directed to the precise progression and advancement of the damage to the claimant’s property.
The question of progression was relevant in the context of the extent of the liability of the appellant insurer. On this issue the appellant’s argument was that the liability should fall into subsequent policy years or at least that the claimant had not sufficiently proven that any relevant liability was sufficiently related to the damage which had occurred during the policy year covered by its policy.
The appeal judge took the view that this raised essentially a factual question and this ground of appeal was an attempt to go behind the findings of fact of the trial judge. Having considered the judge’s findings on the issue he noted that the judge had well in mind the possibility that there could be an allocation of damage between different policy periods. Ultimately, the trial judge had rejected the case against the other two insurers essentially on the basis that there was no compensable incremental damage which had been caused in subsequent policy periods. The reason for that was that significant damage had been caused during the currency of the appellant’s policy and indeed had become visible to the claimant. In the present context, he noted that it was the causation of the damage rather than the discovery of the damage which is critical for the liability of the insurer. As to this, it is significant that trial judge in his decision said that “the state of affairs which created the progression of physical damage to the Property was created by the negligence of the Installer during the operational period of the First Defendant’s Policy”. The trial judge was also satisfied that “more than nominal physical damage occurred during the operation period of the First Defendant’s Policy”.
There was no basis on which the appeal judge could or should revisit the trial judge’s fact-finding. It was, as he saw it, a jury question for the judge and ultimately, he noted that the judge formed the view, having considered the evidence as a whole, that the incremental damage had not materially added, in terms of the costs of refurbishment, to the costs which were required in respect of the damage which occurred during the policy period. Whilst there was further incremental damage which occurred subsequent to the policy period the substance of the trial judge's reasoning and fact-finding was that if the position had been frozen at the end of the appellant insurer’s policy period, the same costs of repairing significant damage and taking out the product installed would have been incurred.
Whilst the issue of timing and progression of damage will always be a factual question in every case, this case does highlight the importance of giving very careful consideration to the causation of the damage alongside the issue of discovery of damage. In the context of product liability policies, where liability pivots on the initial damage, successive insurers may not necessarily be on risk at all, despite there being incremental damage within their policy period, if, as was the case here that incremental damage did not materially add to the repair costs.
If you are interested in discussing this or similar cases further, please get in touch.
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