NHBC loses court appeal over Peabody’s insolvency insurance claim

But the insurer denied Peabody’s claim, arguing that the landlord had run out of time because its contractor entered administration more than six years before the claim was made.

NHBC took Peabody to court to strike out the claim, but in 2024 the High Court ruled in favour of the landlord. 

It found that Peabody’s cause of action came not when the contractor went bankrupt, but rather from the point where it had to incur further costs to complete the works.

NHBC obtained permission to appeal that decision, but this has now been dismissed.

The claim stretches back to 2015 when Catalyst Housing, before its merger with Peabody, employed contractor Vantage Design & Build in a £10.4m deal to build 88 affordable homes at RAF Stanbridge, a former Royal Air Force site, in Bedfordshire.

Vantage appointed administrators in June 2016, around six months after work began on site. After that, Peabody appointed a contract manager to complete the homes through individual contracts. The homes were completed in January 2021.

Peabody made its insurance claim in July 2023, seeking £913,500 plus interest to cover extra costs it said had accrued over what would have been paid to Vantage. 

The housing association argued that its cause of action began when it had to pay more for the homes to be completed, adding that this was “significantly later” than the date of Vantage’s insolvency.

A Peabody spokesperson said: “We’re pleased with the court’s decision.”

Mark London, William O’Brien and Alicia Ogborn of Devonshires acted on behalf of the landlord in this case.

In a blog post, Devonshires said: “The judgment confirms that when determining the cause of action under policies of indemnity, it is crucial to identify the risk or event that is insured against.

“That is consistent with the well-established principle that a cause of action under an insurance policy accrues on the happening of the event insured against. In this case, Peabody was not insured only against contractor insolvency; Peabody was insured against the risk of the contractor becoming insolvent and Peabody having to pay more to complete the new homes.”

NHBC was also approached for comment.