Factual and Procedural Background
The Respondent owned a block of 72 flats and was effectively insured under a housing warranty policy issued by Company C as cover-holder for the Appellant. The policy covered specified defects causing destruction, physical damage, or the threat of imminent destruction or physical damage requiring immediate remedial measures. [1][2][3][4][5]
The insurance period ran from 22 May 2008 to 21 May 2020. Shortly before its expiry, the Respondent notified claims concerning alleged fire-safety and building defects, including combustible cladding, missing or defective cavity barriers, and building debris. [6][7][8][9][10]
The Respondent's notification identified no urgent repairs but referred to a “Waking Watch” and associated preventative measures. A Company D fire-risk assessment classified cladding and workmanship issues as medium priority and the absence of compartmentation as high priority. [11][12][13]
The High Court dismissed most of the Appellant's application for summary judgment. The Appellant appealed that decision to the Court of Appeal. [14][15]
Legal Issues Presented
- Whether clause 3(a)(iii) required the threat of destruction or physical damage to be likely to occur sufficiently soon to constitute an “imminent” threat. [16][17][18]
- Whether the alleged fire-safety defects had a real prospect of satisfying the policy's requirements for immediate remedial measures during the insurance period. [16][17][18]
- Whether the Respondent's claim had no real prospect of success so as to justify summary judgment. [17][18]
Arguments of the Parties
Appellant's Arguments
- The lower court had failed to give “imminent” and “immediate” their ordinary and effective meanings. [18][19]
- The threat had to be both likely to occur and likely to occur sufficiently soon, and remedial measures had to be required before the end of the insurance period. [17][18]
- On the alleged passive fire-safety defects, the Respondent had no real prospect of success and the Appellant was entitled to summary judgment. [20][17][18]
Respondent's Arguments
- The policy responded where the facts gave a reasonable observer a realistic prospect of destruction or physical damage occurring during the insurance period. [21][22]
- Alternatively, cover was engaged where there was a serious risk amounting to a real likelihood of destruction or physical damage during that period. [23]
- The Respondent argued that the persistent possibility of fire, together with the defects and the Waking Watch, supported the existence of an imminent threat. [24]
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Gerling General Insurance Co and others v Canary Wharf plc [2003] EWHC 2234 (Comm) |
Whether damage is imminent is assessed prospectively and objectively by asking whether a reasonable person would regard it as sufficiently likely to happen sufficiently soon. The issue is one of fact and degree informed by the policy's structure and provisions. |
The Court of Appeal held that the lower court adopted this formulation and did not fail to give “imminent” its proper meaning. [25][26][27][28] |
| Zagora Management Ltd v Zurich Insurance plc [2019] EWHC 257 (TCC) |
The decision was considered in the lower court's analysis of the meaning and operation of the policy wording concerning imminent damage. |
The Court of Appeal referred to the lower court's consideration of the case but did not independently set out or apply a separate principle from it. [29] |
Court's Reasoning and Analysis
The Court held that the lower court had adopted the correct objective and prospective approach to imminence. The relevant question was whether the risk of fire was sufficiently serious and would eventuate sufficiently soon. [27][28][30]
The lower court's conclusion that a reasonable observer might regard there as being a serious risk of fire, and a consequent threat of destruction or damage sufficiently soon, was open to it on the evidence. That conclusion was sufficient to defeat summary judgment, even though the insured peril was the threat of damage or destruction rather than the threat of fire itself. [31]
The Court rejected the contention that the lower court had treated fire damage as automatically imminent. The lower court had recognised the temporal requirement and had deliberately avoided reaching a final conclusion on matters of fact and degree. [32][33]
As to immediate remedial measures, the Court considered that the severity of the risk and the urgency of remedial work were related matters. The notification was not determinative, while the high-priority assessment of compartmentation defects and the Waking Watch could support an argument that remedial steps had been taken. [34]
The Court considered that the remaining questions, including the significance of any other remedial works and their timing, were matters properly resolved at trial rather than on a summary judgment application. [34]
It was unnecessary to determine the alternative formulations advanced in the Respondent's Notice. [35]
Holding and Implications
Appeal dismissed. The Respondent's claim retained a real prospect of success, and the lower court was entitled to refuse summary judgment. [36][37][38]
The direct consequence was that the disputed policy-coverage issues remained for determination at trial. The decision did not finally establish that the policy responded to the alleged defects; it held only that the claim could not be summarily dismissed on the material before the Court.