CA-2024-002563 - [2025] EWCA Civ 932

The Insurance Policy

The policy can be seen as a laudable attempt to convey in user-friendly language what is covered and when claims can be made. But it is not unfair to say that some of the language is rather muddled, perhaps because it is trying to cover the relationship between three different parties, namely the NHBC, the employer and the contractor. It is also designed to dovetail in with the Buildmark policy, which is designed to protect a different party altogether, namely the homeowner that buys the completed home. Perhaps it is unsurprising that, in looking in so many different directions at once, the language of the policy can be rather opaque.

One of the areas of cover in the Policy is property damage, covered in ‘Part C – Home damage cover’. That applied “if there is physical damage to the home(s) because the contractor failed to build certain identified structural elements of the homes in accordance with NHBC requirements”. The employer (in this case Peabody) could make a claim under this section if they thought “there is physical damage to the homes”. In those circumstances, the NHBC promise:

“We will take responsibility for having the work done to put right the physical damage to the homes, if the cost to us is above the excess.

Alternatively, if we choose to, we will pay you what it will cost us to have the work done, less the excess amount applicable.”

Option 1 is the section of the policy with which we are principally concerned. I adopt the judge’s use of the lettering [A]-[E] to divide up the relevant parts because, although they do not appear in the original, they make the different elements of Option 1 easier to identify:

“[A] Option 1 – Insolvency cover before practical completion

[B] When this section applies

This section applies if you lose the amount paid to the contractor in accordance with the building contract or have to pay more to complete the building of the home(s), because the contractor is insolvent or commits fraud.

[C] When you can claim

You can only claim under this section up to the date of the Buildmark Choice certificate. Contact us and tell us if you have lost the amount you paid to the contractor or the contractor has not completed the home(s).

[D] What we will do

We will pay you the reasonable extra cost above the contract price including professional fees, for work necessary to complete the home(s) to the NHBC requirements; or

We will reimburse the amount paid to the contractor in accordance with the building contract which cannot be recovered from them.

[D1] In addition, we will pay the cost of reasonable precautions to secure the work defined in the building contract against unauthorised entry, theft and vandalism until work resumes.

[E] Conditions and limitations

This option will only apply if included on the quotation and the additional premium has been paid to and accepted by us.

There are limits to how much we will pay (as explained on pages 14 & 15)

Some things are not NHBC's responsibility under Buildmark Choice (as explained on page 16).”

Limits as to how much the NHBC would pay out are set out at pages 14-15 of the policy. In respect of Option 1, it is said that “the most we will pay for all claims under Option 1 is 10% of the original contract price. We deal with all claims in the order they are made. When the overall limit is reached, we will not pay further claims.” Another limitation is that the NHBC say that “we will not be responsible for costs resulting from your unreasonable delay in pursuing a claim.”

Amongst the relevant definitions are: