In a matter where the liability for damage was insured under a public and products liability policy for damage “arising out of or in connection with” a product, it was found that damage which commenced during the policy period but subsequently progressed was indemnified only under the policy in place at the time of commencement of the damage.

A cavity wall insulation product (CWI) was negligently installed in the residential property of the insured’s client. The installation left voids which meant that the house was more exposed to problems of damp and mould which started appearing in about the middle of the policy term.  There was further incremental damage which occurred subsequent to the policy period when the liability was insured by other insurers. There was no dispute that the installer’s were liable in delict for the cost of stripping out the defective CWI. That liability arose, according to the court, at the time it was discovered. The court held that there was a very close and direct connection between the damage to the house which occurred during the policy period and gave rise to the delictual liability, and the liability for the total cost of removing the defective CWI. The liability was found to have arisen, at least, out of damage to the house. The insulation material was positively harmful to the house when installed and had damaged its fabric which had to be made whole by removing the defective CWI.

The court therefore found that, even though there was progressive damage after the expiration of the policy period causing increased repairs costs, all the damage occurred during the period of insurance or, if not, the liability of the insured was liability ‘arising out of’ damage which occurred during the period of insurance.

The insurer was thus liable to pay for the whole cost of stripping out the CWI.

The findings of fact and the meaning of liability “for or arising out of” the negligent work amounted to a generous interpretation in favour of cover, probably because the company liable for the loss to the third party homeowners was insolvent. It does demonstrate how broad liability policy wording can open pockets wider than intended.

[Atta v HDI Global Specialty SE [2023] EWHC 2028 (KB)]

Atta v HDI Global Specialty SE [2023] EWHC 2028 (KB) (04 April 2023) (bailii.org)