New-build home owner beware! The limitations of new-build home insurance policies

New-build home owner beware! The limitations of new-build home insurance policies

House Key

The ache for home lives in all of us, the safe place where we can go as we are and not be questioned.” – Maya Angelou

Purchasing a new home can be an exciting and rewarding moment for many. Designed to cost less to run and fitted with the latest technology, many new homes come with warranties and guarantees to cover any potential problems that may arise and to give new homeowners peace of mind.

The most common form of protection provided to a purchaser of a new build property is a ‘new home warranty’. This is a form of insurance policy which protects the buyer should any structural defects be discovered at the property. While there are many different providers of such warranties, typically each will last for 10 years. One common question however is when the duration of such a policy runs from and the limitation on when an action can be brought against another party for defective works.

Recently however there has been some clarity on this point, as set out in the case of Griffiths and another v Liberty Syndicate 4472 [2020] EWHC 948 (TCC).

Background

The case concerned an apartment within a former factory which had been converted for residential use. As part of the development, several common parts had been created for use by the residents including an atrium and outdoor rooftop space, which included a running track and barbeque area. The claimant, Mr and Mrs Griffiths, claimed that these common parts suffered from defects allowing rainwater to leak into the building and cause structural damage to the property.

The Griffithses, along with other apartment owners at the development, were insured under a new home warranty policy underwritten by the insurer, Liberty Syndicated. Under the policy, the insurance relating to the common parts of the development expired on 3 October 2010.

Both parties accepted that the defects relating to the common parts had been brought to the developer and insurer’s attention on or about 5 July 2009. The management company subsequently made a claim under the policy on behalf of the apartment owners on 29 March 2010 which Liberty subsequently rejected by email on 17 June 2011. The legal proceedings were not issued until a little under eight years later – on 4 January 2019.

Section 5 of the Limitation Act states that an action relating to a simple contract cannot be brought against the other party after six years from the date on which the cause of action accrued.

It was agreed by the parties that if liability had accrued before 5 January 2013 the claim was statute barred, because the loss indemnified by the policy would have occurred over six years before the claim was issued.

It was argued by the Griffithses that the defects were notified to the insurers within the insurance period and that the liability was triggered, and the limitation period started to run, when they suffered loss, and that they would suffer loss when they spent money to remedy the defects, and not before. Accordingly, the claim was still live and capable of being pursued in the courts.

The insurers argued that the defects were first discovered on or before 23 March 2010, alternatively 5 January 2013, and that liability under the policy was triggered by the notification that was made in March 2010. The claim was therefore statute barred.

Decision

HHJ Pelling QC, sitting as a High Court Judge rejected the Griffithses’ argument, stating that the claim was statue barred.

The Judge stated that the Griffithses’ argument would allow a homeowner to dictate the date on which time started to run under the policy by choosing whether or not to pay the cost of rectifying a defect. This would allow the policy, in theory, to run indefinitely until such point as costs were incurred.

To agree to this point would also undermine the point of having such insurance, as the warranty was ultimately provided to homeowners to allow them to obtain remedial works even where it would normally be too expensive for them to pay for it themselves.

Conclusion

The decision in Griffiths is not an unprecedented one and supports several prior decisions made by the court. It does however serve as a timely reminder to new homeowners that the court does not always favour property owners and that there are important limitations on such warranties.

In particular, individuals seeking to rely on a new home warranty need to be aware that, under the Limitation Act, an insurance claim for loss, or legal proccedings in pursuit of that claim, must be brought within six years of the cause of action accruing. To that end, it is vital that, should a new homeowner become alert to such a loss, that they make a claim as soon as possible or risk being unable to recover any losses incurred.

 

 

 

 

 

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