A Vivid Reminder: Fire Safety Defects Can Trigger Cover
Ten years on from Grenfell, fire safety defects remain one of the defining issues in the built environment. Against that backdrop, the recent decision in Vivid Housing Ltd v Allianz Global Corporate & Specialty SE [2025] offers important guidance on how the courts approach ‘imminent damage’ and reinforces the need for insurers to be part of the solution rather than an obstacle to remediation.
At Fenchurch Law, we have advised on several imminent danger cases, an example being Nova House, Slough – which involved a variety of fire safety and structural issues. The decision in Vivid, which involved an application for summary judgment, sits squarely within this developing line of authority and offers policyholders helpful clarity.
The Policy
The operative clause at the heart of this application is Clause 3(a), which states:
Clause 3(a) Operative Clause
"The Insurers agree to indemnify the Insured against the cost of repairing, replacing and/or strengthening the Premises following and consequent upon a Defect which becomes manifest and is notified to Insurers during the Period of Insurance and not excluded herein causing any of the following events:
(i) destruction of the Premises; or
(ii) physical damage to the Premises; or
(iii) the threat of imminent destruction or physical damage to the Premises which requires immediate remedial measures for the prevention of destruction or physical damage within the Period of Insurance."
The Dispute
Vivid submitted a claim in May 2019, contending that several building safety defects had manifested at the Property, and that they all fell within the Policy's definition of "Defect", thereby triggering the Operative Clause. Allianz denied that contention.
The summary judgment application focused solely on the meaning and scope of sub-clause(iii):
"the threat of imminent destruction or physical damage to the Premises which requires immediate remedial measures for the prevention of destruction or physical damage within the Period of Insurance."
The key question here, assuming that there were such “Defects”, was whether there was a risk of imminent damage.
The Defects
- Defect 1 (Rockpanel cladding): Vivid alleged that combustible RP cladding and foam insulation were used on a building over 18m high without proper testing or barriers. It also said that combustible debris in cavities could enable fire and smoke to spread externally.
- Defect 2 (vertical cavity barriers): Vivid contended that required vertical cavity barriers were missing, allowing fire or smoke to spread unnoticed throughout the building.
- Defect 3 (horizontal cavity barriers): Vivid claimed that missing or faulty cavity barriers at party walls, slab edges, and window openings could allow fire and smoke to spread undetected throughout the development.
- Defect 4 (Rockclad bracketry): Vivid states that RP cladding panels were not properly secured to vertical rails, with brackets that were inadequately supported or overstressed, posing a risk of detachment or damage.
- Defect 5 (building debris): Vivid claimed that debris left in building cavities created a fire hazard, facilitated fire spread, and enabled water to enter flats, causing further damage.
Allianz’s Position
Allianz argued that “imminent” required a serious and immediate likelihood of damage occurring soon, which it said was not the case as of August 2019.
In their view, the clause did not cover threats that would materialise only if a non-imminent event occurred, nor extend to circumstances where remedial measures are not immediately necessary to prevent destruction or damage within the policy period.
There was no likelihood of damage occurring soon as at August 2019, Allianz said, because:
(i) Vivid’s response in the notification to whether urgent repairs were required was “N/A.”
(ii) The only measures implemented during the policy period were “Waking Watch” arrangements, which were not intended to prevent property damage.
(iii) No damage occurred during the policy period, despite the absence of remedial works.
Vivid’s Position
Vivid, by contrast, contended that “imminent damage” should be assessed objectively, and that there was no requirement that the destruction or physical damage should happen soon. On its proper construction, they said that sub-clause (iii) applied where a reasonable observer would conclude that there was a realistic prospect of physical damage requiring immediate remedial measures to prevent it.
As to each of the defects, Vivid argued that:
(i) Defects 1, 2, 3 and 5 made the development vulnerable to physical damage in the event of fire, giving rise to a realistic prospect that imminent physical damage might occur. That risk was constant given the frequency of fires, supported by evidence of similar incidents.
(ii) Defect 4 put the cladding panels and bracketry at risk of deformation and detachment, giving rise to a realistic prospect that imminent physical damage might occur.
The Court’s Decision
The Court considered whether the defects created a threat of imminent destruction or damage sufficient to engage the policy.
As to the fire safety defects, the Court held that it could not be said there was no realistic prospect of establishing a serious risk of fire and imminent damage, particularly given the implementation of Waking Watch measures, which reflected an ongoing fire concern. Put differently, the presence of a Waking Watch did not undermine the concern of a present or imminent danger. Quite the opposite, it was that very concern which required the Waking Watch to begin with.
The court emphasised that the policy required not only an imminent threat but also that immediate remedial works are necessary to prevent destruction or damage within the period of cover. Whether this threshold is met is fact-sensitive; typically, imminent threats necessitate immediate repair or mitigation. Temporary measures such as Waking Watch do not negate the need for remedial works.
Ultimately, the court concluded:
"Vivid’s case on the construction of the policy clause and whether the policy responds has a real prospect of success in relation to all Defects other than Defect 4, and the application for summary judgment is refused."
In respect of Defect 4 (Rockclad bracketry), which was unrelated to fire risk, the Court found in Allianz’s favour and granted summary judgment.
For Defects 1, 2, 3 and 5, the Court accepted that the fire‑related risks created a realistic prospect of imminent damage.
ANALYSIS
Why Did the Court Exclude Defect 4?
Defect 4 involved the risk of deformation and detachment of cladding panels and bracketry. Intuitively, one might say this creates a clear risk of physical damage. However, the court held that the defect did not amount to a fire‑related risk and did not require “immediate remedial measures” to avoid destruction or damage within the policy period.
Two nuanced reasons are at play:
- Immediacy: the deformation risk was progressive, not acute.
- Requirement for immediate works: unlike fire safety defects, the defect did not necessitate urgent intervention to avoid catastrophic loss.
This highlights a key theme in imminent danger cases: the immediacy of required remedial work often drives the outcome more than the nature of the defect itself.
Why Vivid Matters
Similar wording has been scrutinised before, most notably in Manchikalapati & others v Zurich Insurance plc & others [2019] (“Zagora”), and the court’s approach in Vivid aligns with and develops that earlier guidance.
In Zagora, the court held that imminence requires a real and present risk, not a remote or hypothetical possibility. Vivid adopts that framework but clarifies how it applies to fire safety defects, emphasising:
- fire events are inherently unpredictable;
- where fire‑related defects exist, the risk of damage is constant; and
- temporary measures (e.g., Waking Watch) do not remove the underlying risk.
CONCLUSION
The decision in Vivid is consistent with previous case law and provides helpful confirmation that:
- Fire safety defects can constitute imminent danger;
- Temporary measures such as Waking Watch do not exclude immediacy;
- The courts will continue to apply the principles developed in Zagora; and
- Insurers must recognise their role in enabling, rather than hindering, fire safety remediation.
For policyholders, the judgment offers helpful reassurance. For insurers, it is a reminder that narrow constructions of imminent danger are increasingly difficult to sustain.
Importantly, policyholders should not be required to wait for an actual fire incident before their insurance coverage becomes applicable. The judgment clarifies that waiting for harm to occur before responding to the risk is both unreasonable and contrary to the purpose of fire safety provisions.
Chloe Franklin is an Associate at Fenchurch Law
New Guidance on the Scope of RCOs: The Upper Tribunal’s Judgment in Edgewater (Stevenage) Limited and Others v Grey GR Limited Partnership
Last week, the Upper Tribunal (Lands Chamber) (“UT”) handed down its judgment in a highly-anticipated appeal against a swathe of Remediation Contribution Orders (“RCOs”), providing further guidance on the scope of section 124 of the Building Safety Act 2022 (“BSA”).
In dismissing the appeal on all grounds, Mr Justice Edwin Johnson confirmed that:
- The First-tier Tribunal (“FTT”) have jurisdiction to make RCOs against multiple parties on a joint and several basis, provided that it is just and equitable to do so (which, he was careful to note, will be a “very fact sensitive exercise”);
- The factors which the FTT may take into account when considering whether it is just and equitable to make the order under section 124(1) of the BSA are “very wide” and are not capable of exhaustion;
- Whilst the initial burden is on the applicant to put forward a case as to why it is just and equitable to award an RCO, the evidential burden is ultimately shared between the parties;
- Reference to a building safety risk in section 120(5) of the BSA is a reference to “any risk” which satisfies the conditions of the BSA, and is not a reference to risks above a particular level; and
- The question of whether remedial costs are reasonable will depend on a number of factors, including any reliance on expert reports as to the scope of the works and the time pressure that stakeholders are under to remediate continuing risks to residents.
We highlight our key takeaways for those operating in the construction and property sectors below.
Background to the appeal
The appeal relates to the development of Vista Tower, a residential high-rise building in Stevenage, the freehold of which was sold to the Respondent, Grey GR Limited Partnership (“Grey”) in 2018.
Soon after, post-Grenfell investigations led to the discovery of significant fire safety defects in the building’s external walls and a Remediation Order was issued requiring Grey to remedy those defects by 9 September 2025.
On 24 January 2025, Grey was granted RCOs against 76 corporate entities associated with the developer, Edgewater (Stevenage) Limited (the “Appellants”). Controversially, those RCOs declared each of the 76 Appellants jointly and severally liable for the total sum payable, which was in excess of £13 million.
The RCOs were appealed on a number of grounds.
Joint and several liability for RCOs
The first ground of appeal concerned whether the FTT had the jurisdiction to issue an RCO on a joint and several basis.
The Appellants, in arguing that it did not, relied on the fact that section 124(2) of the BSA describes an RCO as an order against “a specified body corporate or partnership” in the singular, rather than in the plural. In other words, the Appellants said that whilst it is open to the FTT to make a series of orders against different entities, it cannot impose a joint liability under the same order.
Interestingly, in parallel with the RCO application, Grey has commenced proceedings in the High Court (Technology and Construction Court), against the developer and two other Appellants, for a Building Liability Order (“BLO”) pursuant to section 130 of the BSA. Those proceedings have not yet come to trial, but the Appellants’ argument as to the scope of the wording in section 124(2) lead to an interesting analysis of the distinction between RCOs and BLOs.
The UT confirmed that section 130 has a different jurisdiction to section 124, and works in a different way. Section 130 applies where a body corporate has a liability under (a) the Defective Premises Act 1972 or section 38 of the Building Act 1984, or (b) as a result of a building safety risk, and is “fairly rigid in its operation”: the liability to which the original body is subject can be made transmissible to associated parties.
In contrast, under section 124 RCOs are “more flexible and open ended”: it is for the FTT to decide what amount should be paid, and by whom, and on what basis.
Ultimately, Mr Justice Johnson held that the Appellants’ singular interpretation of section 124(2) was too narrow, identifying no reason why it could not be read as a plural. Most significantly, however, he identified an obvious problem with enforcement where one or more respondent is impecunious:
“If one then assumes a situation, which will not be uncommon, where some of the respondents are or may be unable to pay, the applicant party or parties will be left with something resembling a colander, in terms of their ability to recover the total sum ordered to be paid.”
In that scenario, where an applicant is prevented from obtaining the necessary funds for remediation, the statutory purpose of the BSA is clearly frustrated. For that reason, the UT has held that the FTT does have the power to make joint and several RCOs, noting that it will not be the starting position in every case, and that it must carefully consider whether it is just and equitable to do so (which is likely to be a “very fact sensitive exercise”).
Notably, the Appellants also argued that their inability to seek contributions from others in FTT proceedings (pursuant to the Civil Liability (Contribution) Act 1978) was another reason why joint and several liability should not be imposed. However, the UT rejected that argument on the basis that Parliament had intended not to concern itself with the question of contribution in relation to RCOs (but presumably had done so in relation to BLOs, which are pursued via court proceedings) and, in any event, the issue of apportionment/contribution could be dealt with as part of the just and equitable analysis, where circumstances required.
The “just and equitable” test
The Appellants’ secondary position was that it was not just and equitable to grant an RCO as some of the Appellants did not participate in the development, nor profit from it.
The FTT had considered the very limited evidence provided by the Appellants in relation to their corporate structure, and had found that they were part of a “fluid, disorganised and blurred network” which, rather than being financially separate, most likely had a tendency to take from whichever company had money when it was needed by another. The Appellants’ evidence on this point did not impress the UT, with Mr Justice Johnson describing it as “incomplete and unsatisfactory”, a factor which appears to have weighed heavily on him when considering the grounds of appeal.
In rejecting the argument that it was not just or equitable for the FTT to award the RCO on a joint and several basis, Mr Justice Johnson confirmed that the FTT’s discretion is “very wide” and that, in drafting section 124(1), Parliament had chosen not to list or limit the factors to be taken into account. He remarked that, if he were to try and list the factors on which the FTT might rely, he “would be at risk of committing the basic error of attempting to re-write Section 124(1)”.
Mr Justice Johnson also highlighted that, whilst the initial burden is on an applicant to put forward its case as to why it is just and equitable to make an RCO, that burden is not to be overstated, and it is for a respondent to put its case in response.
The meaning of “building safety risk” in section 120(5) of the BSA
One area in which the UT disagreed with the FTT was the meaning of “building safety risk” under section 120(5) of the BSA.
The FTT had defined a “building safety risk” restrictively, as any risk which exceeded the “low” or tolerable category used in PAS9980 assessments. Mr Justice Johnson was careful to correct that interpretation however, advising that section 120(5) “means what it says”.
In other words, it does not refer to any particular level of risk and refers instead to any risk which is captured by the BSA. If Parliament had intended to refer to risk at a particular level, it would have done so (as it had in other parts of the legislation). As no particular level of risk had been referenced in section 120, it was not for the FTT to rewrite the BSA.
Whilst not mentioned in the judgment, that analysis is consistent with the FTT’s recent decision of 6 January 2026 in Canary Riverside Estate (LON/00BG/BSA/2024/0005 LON/00BG/BSB/2024/009) which held that “any risk” of fire spread or structural collapse, however small, is enough to constitute a building safety risk under section 120.
The reasonableness of remedial costs
Finally, the Appellants challenged the reasonableness of one aspect of the costs incurred. Namely, the removal of combustible foam insulation from cavity walls.
Expert witnesses had agreed that, from a purely technical perspective, it had been disproportionate to remove the foam altogether, and a cheaper and simpler solution would have been to leave it in place with the addition of a cavity barrier as effective fire stopping.
In considering the reasonableness of the works, the FTT had placed “significant weight” on the agreement of the experts, but had also considered other factors that may have affected the scope of the works, including the need to implement the remedial scheme quickly in order to minimise the continuing risk to residents living in unsafe conditions, and the fact that Grey’s PAS9980 report had concluded that the foam insulation was “high risk” and needed to be removed.
The Upper Tribunal held that the costs incurred in removing the insulation were reasonable on the basis that it was not for Grey to question the advice of its fire engineers. Rather, it was reasonable for Grey to have relied upon the PAS9980 report and not to have revisited it later in order to reduce the scope of works, especially considering the time pressure it was under from the Secretary of State to minimise the continuing risk to residents.
Implications
The decision reads as a salutary tale to developers and their associates: not only does the FTT have jurisdiction to award RCOs on a joint and several basis, but that jurisdiction may extend to associates who have not participated in the development, or profited from it.
Clearly, that is more likely to be the case where (a) there is a question mark over whether the developer is financially able to meet its responsibility under the RCO, or (b) where respondents fail to provide a comprehensive explanation of corporate structures, or are part of financially fluid networks that cannot easily be isolated, all of which were significant factors in the UT’s reasoning.
Whether the Courts adopt the same analysis in relation to BLOs remains to be seen, although that is a significant possibility given how other UT judgments have been upheld by the Courts (for instance, Adriatic Land 5 Ltd v Long Leaseholders at Hippersley Point [2025] EWCA Civ 856).
Authors
Fenchurch Law – Annual Coverage Review 2025
As the insurance market continues to navigate evolving risks, regulatory frameworks, and geopolitical developments, 2025 has delivered a series of judgments that set important precedents as well as reaffirming established coverage principles. This annual review highlights the key themes emerging from these decisions and their practical implications for those responsible for managing coverage and compliance.
The cases reported this year address critical issues such as the interpretation of policy terms, the scope of notification obligations, the application of fair presentation duties and the classification of policy terms under the Insurance Act 2015. They also explore the impact of third-party rights, insolvency considerations, and principles regarding multiple cover when ‘other insurance’ clauses are in play.
Collectively, these rulings clarify the boundaries of contractual and statutory duties, reinforce the importance of timely and accurate disclosures, and provide guidance on maintaining coverage integrity in complex scenarios.
This round-up aims to equip policyholders and brokers with a clear understanding of the legal trends shaping the insurance landscape, including salutary reminders and pitfalls to avoid.
Unless otherwise stated, the Insurance Act 2015 is referred to as the “2015 Act” and the Third Parties (Rights Against Insurers) Act 2010 as the “2010 Act”.
Insurance Act 2015
- Lonham Group Ltd v Scotbeef Ltd & DS Storage Ltd (in liquidation) (05 March 2025)
In this Judgment, the Court of Appeal issued seminal guidance on how the 2015 Act treats representations, warranties, and conditions precedent. The Court was asked to determine whether the requirements under a Duty of Assured clause were representations or conditions precedent and thus triggering different sections of the 2015 Act.
The policy contained a three‑limb “Duty of Assured Clause” requiring D&S to:
- Declare all current trading conditions at policy inception.
- Continuously trade under those conditions.
- Take all reasonable steps to ensure those conditions were incorporated into all contracts.
The Court was asked to consider whether all three limbs needed to be read collectively (i.e. they would all be classified as either representations or conditions/warranties) or separately (so that each limb was capable of a separate classification). Overturning the decision of the High Court, the Court found that limb 1 was a pre-contractual representation subject to the duty of fair presentation of the 2015 Act, but limbs 2 and 3 were warranties and conditions precedent. As such, in accordance with the 2015 Act, the Insurer had no liability after the date on which the warranty had been breached.
This classification was said to reflect the 2015 Act’s intent: representations allow for proportionate remedies if inaccurate; terms requiring future conduct held to be warranties and/or conditions, by contrast, enable insurers to reject coverage upon breach, provided the terms are clearly drafted.
This decision marked the first major Court of Appeal test of Part 3 of the 2015 Act, and confirms that Duty of Assured clauses can contain both historic representations that go to the Insured’s duty of fair presentation, and warranties as to future conduct, which can have particularly catastrophic consequences if breached. It serves as a reminder to Policyholders and Brokers to scrutinise policy terms and ensure compliance.
Read our full article here.
- Clarendon v Zurich [2025] EWHC 267 (Comm) – Commercial Court Judgment (13 February 2025)
Fenchurch Law acted for Clarendon Dental Spa LLP and Clarendon Dental Spa (Leeds) Ltd, who claimed under a Zurich property damage and business interruption policy after a major fire. Zurich sought to avoid liability, alleging breach of the duty of fair presentation under the 2015 Act for failing to disclose insolvency of related entities.
The Court examined Zurich’s proposal question, “Have you or any partners, directors or family members involved in the business… been declared bankrupt or insolvent…?,” and held that a reasonable policyholder would interpret it as referring only to current directors or partners, not former entities. Consistent with Ristorante Ltd v Zurich (2021), and applying contra proferentem, the Court confirmed that ambiguity in insurer questions is resolved in favour of the insured and that disclosure obligations are shaped by the questions asked at inception.
Overall, the Court concluded Clarendon’s answers were correct and, in any event, Zurich had waived any right to disclosure beyond the scope of its own questions.
Please see our full article here.
- Delos Shipholding v Allianz [2025] EWCA Civ 1019
The Court of Appeal upheld the earlier Commercial Court’s ruling, reinforcing policyholder rights under marine war risks insurance and clarifying the duty of fair presentation under the 2015 Act. The case concerned the bulk carrier WIN WIN, detained by Indonesian authorities for over a year after a minor anchoring infraction. Allianz denied cover, citing an exclusion for detentions under customs or quarantine regulations and alleging non-disclosure of criminal charges against a nominee director.
The Court confirmed the exclusion must be construed narrowly, only detentions genuinely akin to customs or quarantine regulations fall within its scope and the WIN WIN’s detention did not qualify. It also reaffirmed that fortuity remains where the insured’s actions were neither voluntary nor intended to cause the loss. On duty of fair presentation, the Court held the nominee director (who had no decision-making authority) was not part of “senior management” under the 2015 Act, so the Policyholder had no actual or constructive knowledge of criminal charges against him. Further, Allianz had failed to prove that the charges were material and would have induced Allianz to enter into the insurance contract.
Our article on the Court of Appeal Judgment can be found here. Our earlier article on the Judgment of first instance is also here.
- Mode Management Limited v Axa Insurance UK PLC [2025] EWHC 2025 (Comm)
Following a fire on 7 February 2018 at industrial units in Brentwood, Mode (the named insured) and its director (the property owner) sued AXA under a “Property Investor’s Protection Plan” seeking declaratory relief, specific performance (to reinstate/put them back to the pre‑loss position), and other remedies. AXA had avoided the policy ab initio in September 2018 for alleged misrepresentation/non‑disclosure (including questions over insurable interest and planning permission) and applied for summary judgment.
The Commercial Court (Lesley Anderson KC sitting as Deputy High Court Judge) granted AXA’s application. The judge held that the claims were statute‑barred under the Limitation Act 1980, and in any event had no real prospect of success, including the insured’s bid for specific performance of AXA’s alleged secondary liability to reinstate.
The director’s personal claim also failed because he was not a party insured under the policy. The Court emphasised that, on the pleaded facts and policy wording, specific performance was not an available remedy, and the case could be resolved without a trial.
The Judgment can be accessed here.
- Malhotra Leisure Ltd v Aviva [2025] EWHC
During the Covid-19 lockdown in July 2020, a cold-water storage tank burst at one of Malhotra’s hotels, causing significant damage. Aviva, the property damage and business interruption insurer, refused indemnity, alleging the escape of water was deliberately and dishonestly induced by the claimant and that there were associated breaches of the policy’s fraud condition.
The Commercial Court held that Aviva bore the burden of proving, on the balance of probabilities, that the incident was intentional. The Court found that available plumbing and expert evidence supported an accidental explanation, and Aviva’s own expert accepted the escape could have been fortuitous.
The Court also scrutinised Aviva’s allegations of dishonesty in the presentation of the claim, finding that the Fraud Condition must be interpreted in line with the common law, meaning it applies only to dishonest collateral lies that materially support the claim, consistent with The Aegeon and Versloot. Because there was no evidence of dishonesty, and the alleged inaccuracies were either immaterial or inadvertent, the fraud condition did not bite, and Malhotra Leisure was entitled to indemnity.
Please see our full article here.
In a separate costs hearing, the Commercial Court was asked to determine whether costs should be awarded on the standard or indemnity basis. The claimant’s approved costs budget was £546,730.50, but actual costs exceeded £1.2 million, making the distinction significant.
The Court noted that while there is no presumption in favour of indemnity costs where fraud allegations fail, such allegations are of the highest seriousness and, if unsuccessful, will often justify indemnity costs. The Judge found that Aviva’s allegations inflicted financial and reputational harm and were pursued to trial without settlement discussions. As a result, the Court ordered Aviva to pay the claimant’s costs on the indemnity basis, including an interim payment of £660,000, demonstrating the Court’s uncompromising approach towards unfounded fraud allegations.
Please see our full article here.
Effect of Third Parties Rights against Insurers Act 2010
- Makin v QBE [2025] EWHC 895 (KB), Archer v Riverstone [2025] EWHC 1342 (KB), and Ahmed & Ors v White & Co & Allianz [2025] EWHC 2399 (Comm)
This trio of cases highlights the strict approach taken to claims notification provisions in liability insurance policies alongside their impact under the 2010 Act and reaffirms that Claimants under the 2010 Act will have to suffer the consequences of a policyholders breach of conditions.
The Courts confirmed that third-party claimants inherit not only the insured’s rights but also its contractual obligations. Notification clauses were treated as conditions precedent, even where not expressly labelled as such, meaning a breach of these provisions entitled insurers to deny indemnity.
In Makin, Protec Security delayed notifying QBE for three years after an incident that ultimately led to catastrophic injury. The Court held that the obligation to notify arose once Protec reasonably appreciated potential liability which was well before formal proceedings. Ultimately, failure to comply barred recovery.
Similarly, in Archer, R’N’F Catering failed to notify Riverstone promptly and ignored repeated requests for information. The Court rejected arguments that the claimant’s later cooperation could cure the insured’s breach, confirming that rights lost by the insured cannot be revived under the 2010 Act.
Both judgments emphasise that the trigger for notification is not the incident itself but the point at which the insured knows a claim may arise. Excuses such as administrative errors (argument that relevant correspondence had been sent to a spam folder) or insolvency were given short shrift.
By contrast, Ahmed focused on whether notifications made by White & Co to Allianz were sufficiently clear to trigger coverage under a professional indemnity policy. Despite extensive correspondence, the Court found none of the notifications adequately identified the claims or potential liabilities intended to be covered. The judgment underscores that compliance is not just about timing but also clarity and substance, vague or incomplete notices may fail to engage the policy.
The case also illustrates how technical drafting, such as aggregation clauses and endorsements, can compound the consequences of inadequate notification, limiting recovery even where coverage might otherwise apply.
These decisions reinforce several key points for policyholders and claimants:
- Notification clauses, even if unlabelled, may operate as conditions precedent.
- Breaches by the insured cannot be remedied by third-party claimants under the 2010 Act.
- Both timing and clarity of notifications are critical; “can of worms” notifications must be explicit.
- Failure to comply can result in catastrophic loss of indemnity, regardless of claim severity.
Policyholders, with their Brokers' assistance, should adopt a proactive and precise approach to claims notification to avoid disputes and preserve coverage.
Please see our full article on Ahmed here.
The full Judgment on Ahmed is available here.
Aviation
- Russian Aircraft Lessor Policy Claims [2025] EWHC 1430 (Comm).
In a landmark Judgment handed down on 30 June 2025, the Commercial Court determined coverage disputes arising from the grounding and expropriation of hundreds of Western leased aircraft in Russia following the invasion of Ukraine and the imposition of Russian Order 311 in March 2022. The claims, brought by a consortium of lessors including AerCap, DAE, Falcon, KDAC, Merx and Genesis, were the subject of a “mega trial” and resulted in the largest ever insurance award by the UK courts of over £809 million.
The Court held that Contingent Cover responded because the aircraft were not in the lessors’ physical possession and operator policy claims remained unpaid (interpreting, “not indemnified” as “not paid”). Applying a balance of probabilities standard, permanent deprivation was deemed to occur on 10 March 2022, with Russian Order 311 identified as the proximate cause amounting to an effective governmental restraint. This amounted to governmental “restraint” or “detention,” which fell within the Government Peril exclusion under the All-Risks section. Under the Wayne Tank principle, where there are concurrent causes, one covered and one excluded, the exclusion prevails, meaning All Risks could not respond. Consequently, the claims were covered under the War Risks section.
The biggest takeaway for Policyholders from this case, is the guidance that Mr Justice Butcher adopted from the Australian case of LCA Marrickville Pty Limited v Swiss Re International SE [2022] FCAFC 17, which held that:
“The ease with which an insured may establish matters relevant to its claim for indemnity may influence questions of construction … a construction which advances the purpose of the cover is to be preferred to one that hinders it as a factor in construing the policies.”
Please see our full article here.
Building Safety Act 1972
- URS Corporation Ltd (Appellant) v BDW Trading Ltd (Respondent) [2025] UKSC 21
In summary, BDW (being the relevant developer) sued URS (being the design engineers) in negligence for repair costs from structural defects in two development schemes. The Supreme Court was asked to decide whether such voluntarily incurred cost was recoverable and whether section 135 of the Building Safety Act 2022 (“BSA”) extends limitation for such claims.
The Supreme Court unanimously found that once developer knows that defects are attributable to negligent design then remedial works – even on property no longer owned by it – are not ‘voluntary’ in the sense they fall within the ambit of the engineers’ duty. This fortifies the existing common law principles that loss incurred in reliance on professional duty is recoverable, even absent a direct proprietary interest.
The Court clarified that section 135 of the BSA merely extends time for Defective Premises Act 1972 claims and does not revive or extend limitation periods for tortious claims. Policyholders should note that professional indemnity insurers need not cover historic negligence where properly time-barred under the Limitation Act 1980, unless otherwise endorsed.
The Court also held that section 135 of the BSA does not permit developers to treat their negligent repair costs as falling within extended timeframes, preserving clear statutory boundaries between contract/statutory claims and tort claims.
Read our full article on the Supreme Court’s Judgment here.
CAR Policies
- Sky UK Limited & Mace Limited v Riverstone Managing Agency Ltd [2025] EWCA Civ 1567
Insurers sought permission to appeal the Court of Appeal’s December 2024 decision in Sky v Riverstone ([2024] EWCA Civ 1567), which confirmed that deterioration and development damage occurring after the policy period, but stemming from damage during it, was covered under the CAR policy, along with investigation costs and a single deductible per event.
On 30 April 2025, the Supreme Court refused permission to appeal, leaving the Court of Appeal’s ruling intact. This outcome reinforces that insurers cannot restrict recovery to damage physically present at the end of the policy period and affirms a practical approach to progressive damage under CAR policies.
Overall, the refusal cements the Court of Appeal’s interpretation, providing certainty for policyholders on coverage for post-expiry deterioration linked to insured-period damage.
Our article on the Court of Appeal ruling, now confirmed by the Supreme Court’s dismissal is found here.
Latent Defects
- National House Building Council v Peabody Trust [2025] EWCA Civ 932 (CA)
The Court of Appeal resolved a key limitation question over NHBC Buildmark insurance’s “Option 1 – Insolvency cover before practical completion.” Under this extension, insurance is triggered not by the contractor’s insolvency per se but when the employer (Peabody) “has to pay more” to complete the homes because of the insolvency.
The underlying development involved 175 dwellings, including 88 social housing units. The contractor became insolvent in June 2016, and Peabody arranged for completion thereafter, with practical completion in January 2021. The claim for additional completion costs was brought in July 2023. NHBC contended that the cause of action accrued in 2016, when the contractor became insolvent, and was now statute-barred; Peabody argued instead that it accrued when costs were actually incurred.
The Court unanimously agreed with Peabody, affirming the Technology & Construction Court’s view that the policy insured against additional payment triggered by insolvency, so the cause of action only accrued when extra costs became payable. The NHBC appeal was dismissed.
This decision emphasises the importance of carefully identifying the insured event as defined in policy terms and confirms that policies with “pay-when-loss-incurred” triggers should be interpreted on their true wording rather than conventional accrual rules.
The Judgment can be found here.
Other Insurance
- Watford Community Housing Trust v Arthur J Gallagher Insurance Brokers Ltd
This Judgment was a significant ruling clarifying principles concerning multiple cover and a policyholder’s rights following a cyber-related loss. It was a resounding win for policyholders: securing sequential access to multiple policies.
The Court held that Watford had the right to choose which policies to invoke, having the benefit of PI, Cyber and Combined policies, attracting limits of £5 million, £1 million, and £5 million, respectively. Timely notification was made under the Cyber policy, but late notification was successfully raised by the PI insurer to decline indemnity. The Combined insurer confirmed cover despite late notification.
The Court held that the “other insurance” clauses (limiting cover where overlapping insurance exists) effectively neutralised each other, allowing sequential claims rather than enforcing contribution across overlapping policies. This ruling supports the principle that a policyholder can access each policy in turn until the total loss is covered. Having recovered £6 million, Watford also sought recovery of the additional £5 million under the PI policy had timely notification been made. Consequently, Watford was entitled to a total of £11 million.
As to broker liability, the Court found that, but for the broker’s negligence, the PI policy would have been exhausted. Since it was not, the broker was held liable for the £5 million shortfall. The Judgment is a stark reminder that notification conditions should be identified and complied with. It also emphasises a broker’s duty to accurately advise on policy layers and limitations to ensure the policyholder is clearly instructed and that the advice given is documented.
Our full article can be found here.
Authors
Dan Robin Managing Partner
Catrin Wyn Williams, Associate
Pawinder Manak, Trainee Solicitor
Claims Notifications and Policy Terms: A Taxing Duo
Ahmed & ors v White & Company (UK) Ltd & Allianz Global Corporate & Specialty SE [2025] EWHC 2399 (Comm)
BACKGROUND
This case concerned claims (“the Claims”) brought by 176 investors (“the Claimants”) against White & Company (UK) Ltd (“W&C”), a firm of chartered accountants, and its professional indemnity insurer, Allianz Insurance Company (“Allianz”). The Claimants alleged that they had been provided with negligent advice by W&C regarding a series of high-risk tax-mitigation investments. Following W&C’s insolvency, the Claimants sought recovery directly from Allianz under the Third Parties (Rights Against Insurers) Act 2010 (“the TPRAI”).
The central question was whether Allianz was liable to indemnify W&C under its professional indemnity policy for the losses claimed.
THE POLICY
The policy contained the following terms:
The Notification Clause
"The Policyholder shall, as soon as reasonably practicable during the Policy Period, notify the Insurer at the address listed in the Claims Notifications clause below of any circumstance of which any Insured becomes aware during the Policy Period which is reasonably expected to give rise to a Claim. The notice must include at least the following:
(i) a statement that it is intended to serve as a notice of a circumstance of which an Insured has become aware which is reasonably expected to give rise to a Claim;
(ii) the reasons for anticipating that Claim (including full particulars as to the nature and date(s) of the potential Wrongful Act(s));
(iii) the identity of any potential claimant(s);
(iv) the identity of any Insured involved in such circumstance; and
(v) the date on and manner in which an Insured first became aware of such circumstance.
Provided that notice has been given in accordance with the requirements of this clause, any later Claim arising out of such notified circumstance (and any Related Claims) shall be deemed to be made at the date when the circumstance was first notified to the Insurer.”
(“the Notification Clause”)
Related Claims Clause
“any Claims alleging, arising out of, based upon or attributable to the same facts or alleged facts, or circumstances or the same Wrongful Act, or a continuous repeated or related Wrongful Act…shall be deemed to be a single claim”.
(“the Related Claims Clause”)
Tax Mitigation Endorsement
claims arising from investments which were “pre-planned artificial transactions designed to achieve a specific tax outcome” were subject to a single limit of indemnity of £2 million.
(“the Tax Mitigation Endorsement”)
THE ISSUES:
The Court considered three key issues:
- Whether W&C had validly notified Allianz of the claims or circumstances that might give rise to claims pursuant to the Notification Clause.
- Whether the claims should be aggregated under the policy’s “Related Claims” clause; and
- Whether the Tax Mitigation Endorsement applied.
JUDGMENT
Notification
As part of determining whether the Claims had been validly notified, the Court was asked to consider whether the following three categories of communications constituted a valid notification of all Claims pursuant to the Notification Clause.
- The “Akbar Letters”
These were letters written by the Claimants’ solicitors to W&C, outlining details of specific investments and the alleged negligent advice provided by W&C in relation to those investments.
The Claimants argued that forwarding these letters to Allianz constituted a broad notification, sometimes referred to as a “hornets’ nest” notification, which should be interpreted as alerting Allianz to the possibility of further claims from other clients who had received similar advice, not just the 14 named entities. Allianz, on the other hand, argued that the notification was limited strictly to the 14 specific entities mentioned in the letters and did not extend to any other potential claimants.
Considering all the evidence presented, the Court found in favour of Allianz that the language did not signal a “hornet’s nest” scenario, indicating an influx of future claims. In coming to this decision, the Court stressed that any notification must be clear and specific. In contrast, the Akbar Letters did not provide sufficient information to put Allianz on notice of a broader class of claims.
- The “Block Notification”
These communications between W&C and Allianz contained information regarding HMRC inquiries into premature EIS relief, along with a spreadsheet. An EIS (Enterprise Investment Scheme) is a UK government initiative that encourages investment in small, high-risk companies by offering tax reliefs to investors. The relevance in this case was that the investments in question were structured to take advantage of EIS tax reliefs, and HMRC inquiries suggested that the reliefs may have been claimed prematurely or improperly.
The Claimants argued that the Block Notification, which included details of the HMRC inquiries and a spreadsheet of affected clients, should have been interpreted as a notification of circumstances that might give rise to multiple claims against W&C. Allianz, however, interpreted this notification as relating solely to another entity MKP, which W&C had acquired and not W&C itself, and argued that it did not provide sufficient detail or context to constitute a valid notification of claims or circumstances under the policy.
In the Court’s judgement, a reasonable insurer in Allianz’s position would have perceived the Block Notification as limited, and not indicative of wider claims against W&C, as it did not clearly identify W&C as the subject of the potential claims, nor provide enough information to alert Allianz to the risk of multiple claims. The Court noted that while W&C may have had the subjective awareness of the broader matters, that awareness was not communicated to Allianz and therefore was not within the scope of the notification.
- The “Kennedy Documents”
These were emails between defence counsel, their clients, W&C, Allianz, and the claimants’ lawyer. The documents included correspondence and information that might have disclosed sufficient facts to support a broader notification of circumstances. The Claimants argued that these communications, by virtue of being shared with Allianz, should be treated as a valid notification under the policy. However, Allianz contended that the policy required notifications to be made “by the insured,” and that communications from solicitors or third parties did not satisfy this requirement, unless there was express contractual authority for them to notify on W&C’s behalf.
In his judgment, Judge Pearce noted that such documents might have disclosed sufficient facts to support a broader notification. However, as W&C itself did not communicate them and, absent express contractual authority for W&C’s solicitors to notify on its behalf, Allianz’s receipt did not satisfy the policy’s requirement that any notifications come “by the insured”.
Overall, the Court determined that no communication effectively notified Allianz of broader circumstances or triggered wider policy cover. Only narrow notifications of specific claims, by reference to specific investments, were valid. Hence, policyholders should note the importance of strict compliance with policy notification requirements and the need for clarity and specificity in any notification to insurers.
Aggregation and Endorsement
Judge Pearce then addressed the alternative arguments on aggregation and policy limits if the matters had been validly notified.
Tax Mitigation Endorsement:
This endorsement applied to tax-mitigation schemes such as pre-planned, artificial transactions aimed at achieving specific tax outcomes (including EIS). The Claimants contended that the endorsement should not apply to all the investments in question, or that its application should be limited. Allianz argued that the endorsement was triggered by the nature of the investments, which were designed to achieve specific tax outcomes through artificial means, and that the £2 million limit therefore applied to all claims.
The Court agreed with Allianz, finding that the endorsement applied and that the Claimants’ demand for £50 million was subject to the £2 million limit.
Related Claims Clause
The policy defined related claims as those arising from the same facts, circumstances, wrongful act, or a related wrongful act. The Claimants argued that each investor’s claim should be treated separately, potentially allowing for multiple limits of indemnity to apply. Allianz, conversely, argued that all claims arose from the same or related acts, namely, W&C’s advice on tax mitigation schemes, and should therefore be aggregated as a single claim under the policy.
Supporting Allianz, the Judge found that each of the investor claims relating to EIS stemmed from the same alleged misconduct by W&C, namely, negligent advice on tax‑mitigation schemes and therefore were sufficiently “related” to aggregate as one claim. However, the non-EIS claims were not sufficiently related.
KEY TAKEAWAYS
Overall, this decision is a reminder of the strict approach towards claim notifications and the application of policy terms. Policyholders must ensure notifications are clear, complete and timely, as ambiguous or narrow notifications risk leaving policyholders without cover. Equally, it is critical for policyholders to understand the wording of their insurance policy and be alive to terms that limit cover via aggregation clauses, to ensure policy coverage aligns with risk exposure.
Chloe Franklin is an Associate and Pawinder Manak is a Trainee Solicitor at Fenchurch Law.
When can an insurer join the party? Managed Legal Solutions v Mr Darren Hanison (trading as Fortitude Law) and HDI Global Specialty SE [2025]
This recent High Court judgment sheds light on the circumstances under which an insurer may be joined as a party to underlying liability proceedings. The case explores the nuanced question of when, and in what situations, an insurer is deemed to have “an interest” in a liability dispute, and carries significant implications for claims brought under the Third Parties (Rights Against Insurers) Act 2010 (“the TPRAI”).
Background
Managed Legal Solutions Limited (“MLS”), a litigation funder, commenced proceedings against Darren Hanison trading t/a Fortitude Law (“Mr Haninson”) in 2021 seeking damages (“the Liability Proceedings”).
Although Mr Hanison initially defended the Liability Proceedings in their entirety, including an allegation that he owed MLS an independent tortious duty (“the Tortious Duty”), he was debarred from defending them from 1 November 2024, having failed to comply with an Unless Order.
Separately, HDI Global Specialty SE (“HDI”), which provided Mr Hanison with professional indemnity insurance with a limit of £2m, initiated confidential arbitration proceedings against Mr Hanison in relation to coverage (“the Arbitration”).
As the Arbitration was unresolved at the time of the current application, HDI had an interest in the outcome of the Liability Proceedings. That interest was particularly acute given the risk that Mr Hanison could become bankrupt if he lost the Liability Proceedings, thus triggering an automatic transfer of his rights under the insurance policy to MLS under the TP(RAI) 2010. Accordingly, HDI applied under CPR 19.2 to be added as a second defendant to the Liability Proceedings.
The central argument advanced by HDI was a conflict-of-interest point. While it was in Mr Hanison interest for the Tortious Duty to be established, since that would enable him to pursue an indemnity from HDI – HDI had a clear interest in demonstrating that no such duty existed, as that would absolve them of any obligation to indemnity Mr Hanison. In light of this inherent conflict, HDI argued that its joinder to the Liability Proceedings was necessary to safeguard its interests.
The application
Did CPR 19.2 apply?
MLS opposed the application, contending that the relevant rule was, in fact, CPR 19.6. That provision addresses the substitution or addition of parties after the limitation period has expired, which, according to MLS, was the case here because the limitation period for the alleged Tortious Duty claim had already lapsed.
HDI, however, argued that the relevant claim was only a potential future claim by MLS against it under the TP(RAI) 2010, because that claim was contingent on Mr Hanison becoming bankrupt. On that basis, the limitation period had not expired (and strictly speaking had not even commenced).
The Court agreed with HDI. It concluded that the claim in the Liability Proceedings was not time-barred and that HDI’s joinder did not amount to a “change of parties”. Rather, it would simply permit it to make submissions in relation to the Liability Proceedings. Accordingly, the only question for the Court to decide was whether the requirements of CPR 19.2 were satisfied.
CPR 19.2
CPR 19.2 provides that a Court may permit the addition of a new party where either: (a) it is desirable to do so to enable the Court to resolve all matters in dispute within the proceedings; or (b) there exists an issue involving the new party and an existing party connected to the matters in dispute, such that it is desirable to add the new party to resolve that issue.
The Court accepted that there was “an issue” involving HDI and relied on several authorities, notably Wood v Perfection Travel [1996], which established that it may be appropriate, in certain cases, to add an insurer to liability proceedings and allow them to make submissions.
The Court was also satisfied that the ‘desirability’ threshold was made out. Given that Mr Hanison had been debarred from defending the Liability Proceedings, the Tortious Duty claim was effectively uncontested. The Court therefore found it ‘desirable’ for HDI to be added, unless there were compelling factors to the contrary.
In the Court’s view, no such factors existed. Although MLS argued that the application was delayed, pointing out that the Tortious Duty issue had been ‘in play’ since October 2023 (HDI’s application, by contrast, was made in June 2025), the Court found that the decisive trigger was Mr Hanison being debarred from defending the Liability Proceedings. Until that point, Mr Hanison had maintained his defence. As it was no longer possible for him to do so, it was necessary for HDI to be joined to the Liability Proceedings to protect its interests.
MLS further contended that joining HDI would place it in a more advantageous position than its insured, since Mr Hanison had already been debarred from defending the claim. The Court, however, was not persuaded by that argument. It recognised that HDI had its own distinct interest in the Tortious Duty claim and, if it were not permitted to participate, it would be exposed to the risk of providing an indemnity for an uncontested liability.
Comment
This case raises several noteworthy issues, particularly in relation to the TP(RAI) 2010. While HDI’s application was not itself a TP(RAI) 2010 claim, it was clearly made with the prospect of such a claim in mind.
In this context, it could be argued that permitting an insurer to find itself in a more advantageous position than its insured is out of step with the TP(RAI) 2010 given that, conversely, recent decisions under the TP(RAI) 2010 make it clear that a claimant’s rights are no better than those of an insolvent insured in whose shoes they stand. See, in particular, Makin v QBE and Archer v Riverstone.
That said, it is perhaps unsurprising that HDI was so determined to safeguard its interests. Without the opportunity to participate in the Liability Proceedings, HDI faced the prospect of an uncontested claim against its insured, and a subsequent judgment, which, following Makin v QBE, it would likely be unable to challenge.
This case also brings into focus a vexed issue facing insureds who are required to defend liability claims on one hand, while pursuing claims for indemnity from their insurers on the other. Notably, an insured will usually seek to deny liability in proceedings brought against them, yet, paradoxically, must establish that liability in order to secure an indemnity from their insurer.
MLS has been granted permission to appeal, so its opposition to HDI’s joinder will now be considered by the Court of Appeal. Watch this space.
Alex Rosenfield is a Partner at Fenchurch Law.
Understanding Common Construction Exclusions: Lessons for brokers and policyholders
At our recent London Symposium Daniel Robin, Deputy Managing Partner at Fenchurch Law hosted a session on the principles and importance of interpreting policy exclusions, both within construction, and across the insurance industry.
The session focused on four key areas: contractual liability exclusions, cladding and fire safety exclusions, exclusions relating to liquidated damages, and finally whether Section 11 Insurance Act can apply to Exclusions. It is often said that a policy is only as good as its exclusions, and a good proportion of coverage disputes turn on the correct interpretation of its exclusions. An understanding of these exclusions is essential for brokers to help their clients navigate and mitigate these risks to avoid being left uncovered.
- Contractual liability exclusions managing assumed risks
Contractual liability exclusions are one of the most common exclusions in liability insurance. These clauses prevent insurers from covering risks that arise because the policyholder has assumed ‘obligations by contract’ through indemnities, guarantees, or warranties given to third parties.
Daniel clarified: “Insurers don’t generally want to be on the hook for liabilities that wouldn’t exist under common law or statute, or for promises that go beyond what’s legally required.”
When an insured professional takes on a larger liability than legally required, like guaranteeing an outcome, which is a larger promise than simply the duty to exercise reasonable skill and care, that liability may fall outside insurance cover.
Often claimants will go down the path of least resistance and pursue strict liability contractual breaches, which will leave policyholders having to prove that they would still have been liable under common law, usually for a breach of reasonable skill and care. However, building regulations or planning requirements can be amended retrospectively, sometimes making previous designs non-compliant, which could fall foul of a strict liability contractual provision, but not a breach of a reasonable skill and care.
To protect clients, brokers should scrutinise client contracts for any indemnities, guarantees, or warranties that extend liability beyond common law, and ensure the policy either aligns with those obligations, or that clients understand the potential uninsured exposures, or that the appropriate extensions to cover are purchased.
- Cladding and fire safety exclusions
Cladding and fire safety exclusions are potentially the most topical and complex exclusions facing construction professionals. “One exclusion that is very common; insurers limit their liability for anything arising out of or connected to combustibility or fire protection.”
Fire safety exclusions are standard in many professional indemnity and construction all-risk policies, and they often appear deceptively simple. However, their breadth can leave significant coverage gaps.
Ultimately, interpretation can hinge on small wording distinctions. In an example, Daniel suggested that the exclusion might not apply where the issue concerned a lack of design detail rather than the choice of combustible material. The key was whether the clause referred to the form of materials used or the design or omission itself.
Daniel cautioned: “It’s a fine line, but the burden will always be on the insurer to prove that an exclusion applies. Still, brokers and insureds must be alert to the fact that even design omissions may fall foul of broadly drafted fire safety exclusions.”
Other types of cladding provisions, that limit the scope of cover but do not outright exclude it, can also raise challenges; where exclusions limit indemnity to the “cost of rectifying defective work,” policyholders may find that consequential losses or replacement costs are uninsured.
Brokers must therefore review policy wordings in line with regulatory developments to make clients aware of any gaps in coverage due to evolving building standards or retrospective safety amendments, and ensure that their policyholders are aware of what cover is in place.
- Exclusions relating to damages: liquidated and consequential losses
Furthermore, insurance does not automatically follow the contract, particularly when contracts allocate risk through liquidated damages.
Liquidated damages clauses are a common feature of construction contracts, predefining the amount payable in the event of delay or breach, reflecting an agreed estimate of loss. However, insurers typically exclude these liabilities, viewing them as ‘punitive’ or ‘beyond the scope’ of compensatory loss.
“Insurers exclude them because they don’t allow for an assessment of actual loss and can operate more like penalties even though in reality they can limit the policyholders exposure that they would have in any event under other contractual provisions.”
Exclusion clauses still remain even when liquidated damages are a genuine pre-estimate of loss, meaning that policy coverage generally extends only to direct, compensatory loss, not to sums agreed pre contract.
The knowledge that delay or contractual penalty exposures are unlikely to be insured, even if they seem commercially reasonable, is essential to clients, and brokers should therefore always draft limitation of liability clauses that cover liquidated damage risks too.
- Section 11 Insurance Act and exclusions
Daniel finally discussed an increasingly important area of insurance law: how S.11 Insurance Act 2015 interacts with policy exclusions and warranties.
Section 11 of the Act clarifies that an insurer cannot rely on a breach of warranty or condition precedent if the breach did not actually increase the risk of the loss that occurred. It is not yet tested in Court if this principle could also apply to exclusions, as it may “catch other types of contractual provisions such as conditions precedent or similar rules.” However, the wording of the Act, and the guidance notes suggest that it can apply to exclusions that impose an obligation on the policyholder as a pre-requisite to cover.
Brokers should therefore challenge insurers who decline claims by considering section 11; if the decline is purely technical and unrelated to the loss event, policyholders may still be entitled to claim cover.
Key lessons for brokers
Exclusion clauses are more than technicalities, they define the boundaries of insurance protection. For brokers, several practical lessons emerged: primarily, brokers must scrutinise contractual obligations and identify warranties, indemnities, or guarantees that extend liability beyond ‘duty of care’. It is also important to monitor regulatory shifts, and educate clients on the difference between compensatory damages (insurable) and liquidated or penalty-based damages (typically excluded).
Good communication is essential, not just with your client, but with experts from every industry involved. Effective dialogue between legal, technical, and insurance teams while forming a contract is one of the easiest ways to ensure risk cover is coherent and insurable. The interpretation of an exclusion depends not only on precise wording but also on how contracts are drafted, executed, and aligned with the policyholder’s duties.
Mastering these subtleties and leaning on the expertise of other teams is central to a broker’s role as an adviser. A proactive, detail-oriented approach, combining legal awareness with practical foresight, enables brokers to anticipate exclusions, bridge gaps, and ultimately keep their clients covered.
Daniel Robin is a Partner at Fenchurch Law.
The Fenchurch team reflects on a year in the insurance legal sector
This year, we were pleased to contribute to Insurance Post’s Claims and Legal Review 2025, with Senior Partner, David Pryce, Managing Partner, Joanna Grant and Deputy Managing Partner, Daniel Robin sharing their perspectives on the year.
David shared that this year was one for international expansion. We built on our 2024 launches in Singapore and Copenhagen, and formed a partnership with US policyholder firm Saxe Doernberger & Vita, alongside the opening of an office in Istanbul to serve the wider Turkic region. ‘These milestones put us ahead of schedule on our objective to have a presence in every region by 2030.’
For Joanna, her major disappointment was the continued failure of many insurers to pay valid claims, ‘insurers are still not stepping up to be part of the solution as often as we would like.’
However, she did see some positive developments in the legal landscape, welcoming the courts’ reaffirmation of a policyholder-friendly approach to insurance interpretation. ‘This is a real boost for both the claims and legal sectors, ensuring insurance works as intended.’
Looking back on the year, Joanna also noted that the sharp rise in cyberattacks served as a reminder of the importance of proactive risk management. ‘Armed with the knowledge that cyber-attacks have tripled this year, I would go back and ensure that every policyholder, from the largest, most sophisticated corporates to SMEs, received robust advice on cyber coverage.’
Daniel Robin turned his focus to the year ahead, observing that after the disruptive impacts of COVID-19 and Grenfell, ‘we’re seeing the market begin to soften, which we hope will lead to insurers taking a more holistic and pragmatic approach to coverage, particularly for complex or grey-area claims.’ He also anticipated a final surge in Covid-19 claims activity as limitation periods expire, alongside increased adoption of AI to drive efficiency and support faster, fairer outcomes for policyholders.
Finally, David concluded with one key ambition for the future: ‘My wish for 2026, would be for all policyholders to be treated fairly by their insurers.’
Find the full Insurance Post article here (subscription required): https://www.postonline.co.uk/claims/7959390/claims-legal-review-of-the-year-2025?check_logged_in=1&ref=search
Fenchurch Law strengthens coverage dispute team with Wilkes appointment
Fenchurch Law, the leading international law firm for insurance policyholders and brokers, has appointed renowned insurance lawyer, Chris Wilkes, as a new Partner in their London office.
Wilkes joins the Fenchurch team from his previous role as a leading insurer side lawyer at DAC Beachcroft. With over 47 years of experience in insurance and reinsurance disputes, the seasoned litigator brings a wealth of expertise to the firm. He is recommended by Chambers and Partners as a leading lawyer in insurance, with a particular focus on product liability, property damage, construction and professional indemnity; all key practice areas at Fenchurch Law. In recent years he has been involved in many of the Covid-19 BI claims for his insurer-clients: usually on the other side from Fenchurch Law!
The appointment comes at a time of expansion for Fenchurch Law, as it grows its offering both in London and internationally, most recently with the opening of its Istanbul office on 1st October.
Managing Partner, Joanna Grant, commented: “We have always regarded Chris as one of the leading insurer-side representatives in the market. We couldn’t be more delighted to welcome him and the wealth of experience and legal acumen he brings to our firm.”
Chris Wilkes, Partner, added: “I am excited to join the Fenchurch Law team. I have worked opposite many of their lawyers predominantly in disputes, and they have an outstanding reputation within the legal insurance market. Having worked for insurers, I am interested in their unwavering commitment to levelling the playing field for policyholders in resolving coverage disputes.”
PFAS – Out of the Frying Pan into the Court Room?
Fenchurch Law considers the impact of PFAS on the UK insurance sector, following the rise of litigation progressing through the US courts.
What Are PFAs?
PFAS, or Polyfluoroalkyl Substances, also known as Forever Chemicals, are a group of over 10,000 chemicals that do not readily degrade.
These synthetic chemicals have been utilised in products such as non-stick cookware, waterproof clothing and cosmetics since the 1950s for their non-stick, water- and heat-resistant properties. A concerning aspect of PFAS is that they can accumulate indefinitely in the environment and in living organisms. Their highly durable nature has led scientists to investigate the long-term effects of these chemicals on the body and the environment, with alarming results.
Currently, PFAS are linked to several health issues, including immunosuppression and certain types of cancer. Consequently, and unsurprisingly, regulators are now aiming to tighten the regulation of PFAS chemicals to limit ongoing risks.
Regulatory Landscape in the UK
PFAS are currently regulated under the UK REACH regime (Registration, Evaluation, Authorisation, and Restriction of Chemicals). However, only a limited number of specific PFAS are restricted for use in the UK. For example, PFOA (Perfluorooctanoic acid) and PFOS (perfluorooctane sulfonate) are types of chemicals within the PFAS category and have been listed as Persistent Organic Pollutants (POPs), making it illegal (with limited exceptions) to manufacture or use them in the UK and requiring their removal from products and waste streams.
The emerging risks associated with PFAS use are being closely monitored, with the HSE initiating a six-month consultation earlier this year on the use of PFAS in firefighting foam. UK regulation lags behind other countries; for example, the US has already declared PFAS a critical contamination crisis.
Although the UK regulatory framework for PFAS is still in its early stages, the Environmental Agency has begun assessing the risks. It has identified over 10,000 “high risk” sites believed to contain elevated PFAS levels. Some of the highest-risk sites include firefighting foam manufacturing plants, RAF bases, and airports.
Emerging Risks for the Insurance Sector
PFAS present a complex challenge for insurers. They pose potential long-tail liabilities, similar to claims arising from asbestos or environmental pollution, arising from historic use. Moreover, the increased focus of regulators and claimants on PFAS means insurers must navigate a rapidly changing risk that spans numerous lines of insurance – including general liability, product liability, environmental impairment, directors & officers, as well as property and speciality lines.
Insurers' response to this uncertain risk exposure has been to introduce specific exclusions, often based on existing pollution exclusion clauses. For instance, insurers may add a clause excluding any claims “arising out of, resulting from or relating to PFAS of any kind”. Of course, such exclusions will not be relevant to the extent cover attaches to expired policies.
Lloyd’s has also issued standard PFAS exclusion wordings, LMA5595A and LMA5596A[1].
Types of Claims
- Nuisance Claims: arising from contamination of public drinking water and environmental cleanup.
- Personal injury Claims: resulting from exposure to PFAS in everyday products.
- Property Damage/Diminution of Value Claims: caused by PFAS seeping into the ground from industrial manufacturers.
- False Advertising & Product Labelling: Due to products failing to identify the dangers of PFAS.
The New Asbestos?
The insurance market has been questioning whether PFAS will become the “next asbestos”, as both are similar in that they were once widespread, marketed as safe, and only later revealed to be potentially dangerous.
However, a key difference between PFAS and asbestos is that exposure to many different types of PFAS is unavoidable in the modern world, whereas asbestos exposure can usually be traced back to a specific place and time to establish a cause. This causal link is likely to be far more difficult to establish in the context of PFAS exposure.
Currently, unlike in asbestos claims, no disease has been solely linked to PFAS exposure. This complicates the process of directly attributing the development of diseases such as cancer to PFAS, requiring substantial expert evidence to support the claim that the claimant would not have developed the disease without specific PFAS exposure.
UK PFAS Litigation
Although PFAS litigation is advancing through US courts with multimillion-dollar settlements already reached, UK litigation remains in the early stages. So far, there have been no PFAS cases litigated in UK courts, but two British law firms have announced investigations into PFAS contamination cases. While formal proceedings may take time, we might soon see the first UK group action application for PFAS.
Similarly, to date, there have been no regulatory actions; however, the UK Environment Agency or local authorities could designate contaminated sites for remediation in the future. Companies might then face clean-up costs and seek insurance coverage for those expenses.
Furthermore, the lack of UK personal injury claims may stem from the difficulty in proving a causal link between exposure and injury. While legal systems in countries like the US are more claimant-friendly in this regard, the UK requires evidence that a defendant’s actions caused the harm. The widespread presence of PFAS compounds further complicates this issue. There is no precedent in the UK for relaxing causation standards for PFAS, unlike asbestos, where English law permits more lenient rules for mesothelioma causation.
If and when PFAS claims arise, several key coverage questions will need to be answered, including whether PFAS claims constitute “pollution” and whether the contamination was sudden or gradual. When did an “occurrence” of contamination or injury happen (continuous trigger or not)? Can a claimant’s blood PFAS levels amount to an “injury” within the policy period?
Conclusion
PFAS present an increasing challenge across various sectors due to their persistence, health hazards, and complex liability concerns. Their extensive use, environmental durability, and potential health effects have led to heightened scrutiny and regulatory measures. However, the UK’s response via regulators and the Courts is still in its early phases compared to other jurisdictions.
As UK regulation and litigation evolve, proactive risk management and continuous vigilance will be essential to navigate the uncertainties associated with these “forever chemicals.”
[1] https://lmalloyds.imiscloud.com/LMA_Bulletins/LMA23-035-TC.aspx
Chloe Franklin is an Assoicate at Fenchurch Law
The Cost of Alleging Fraud: Costs Judgment Handed Down in Malhotra Leisure Ltd v Aviva [2025]
Introduction
This article examines the Commercial Court’s recent costs judgment in Malhotra Leisure Ltd v Aviva [2025], a case with significant implications for policyholders facing fraud allegations from their insurers. The decision underscores the risks insurers face when making serious allegations without sufficient evidence, and the potential for substantial costs consequences if those allegations fail.
Background
Earlier this year, we reported on the Commercial Court’s decision in Malhotra Leisure Ltd v Aviva [2025] EWHC 1090 (Comm).
To recap, during the Covid-19 lockdown in July 2020, water had escaped from a cold-water storage tank at one of the Claimant’s hotels causing significant damage.
Aviva, the Claimant’s insurer under a property damage and business interruption policy, refused to indemnify the Claimant on the basis that:
- the escape of water was deliberately and dishonestly induced by the Claimant; and
- there were associated breaches by the Claimant of a fraud condition in the policy.
However, considering that there was no evidence that (a) the escape of water had been induced by the Claimant, or (b) there was any financial motive for it to have been, the Commercial Court held that Aviva’s fraud allegations failed.
The judgment read as a cautionary tale, reminding insurers that allegations of dishonesty cannot be pleaded lightly and that reasonably credible evidence must exist to establish a prima facie case of fraud.
You can read our article on the underlying judgment here - Court pours cold water on insurer’s fraud claims: Malhotra Leisure Ltd v Aviva - Fenchurch Law UK.
The Costs Judgment
This month, the Commercial Court handed down judgment on a number of consequential matters. Crucially; whether Aviva should pay the Claimant's costs of the proceedings on an indemnity or standard basis.
An award of costs on the indemnity basis is considerably more favourable than an award on the standard basis because it:
- places the onus of showing that costs are unreasonable on the paying party;
- disapplies the requirement for proportionality; and
- renders the parties’ approved budgets irrelevant for the purposes of assessment.
In this case, the Claimant had budgeted costs of £546,730.50 but incurred costs of £1,202,957.09. The difference—over £650,000—depended on whether indemnity costs were awarded.
The starting point in all cases is that costs should be assessed on the standard basis and the burden of proving that costs should be assessed on an indemnity basis lies with the receiving party (in this case, the Claimant). Whilst there is no presumption in favour of indemnity costs where a defendant makes unsuccessful allegations of fraud, it will frequently attract indemnity costs in practice.
In Clutterbuck v HSBC Plc [2016] 1 Costs LR 13, David Richards J, as he then was, stated that “the seriousness of allegations of fraud are [sic] such that where they fail they should be marked with an order for indemnity costs because, in effect, the defendant has no choice but to come to court to defend his position”.
In other words, failed allegations of fraud should be a significant factor in persuading a court that indemnity costs should be awarded.
The Claimant referred the Court to the test set out in Suez Fortune Investments Ltd v. Talbot Underwriting Ltd [2019] Costs LR 2019. Namely whether, when one looks at the circumstances of the case as a whole, they are “out of the norm” in such a way as to make it just to order costs on the indemnity basis.
The Parties’ Arguments
The Claimant argued that, because Aviva’s allegations were so serious, they had inflicted financial and reputational damage and, because those allegations had turned out to be misconceived, justice demanded that costs should be recovered on an indemnity basis. An order for indemnity costs would allow it to recover a higher percentage of the costs that it had been forced to incur in order to defend and vindicate itself. It is no answer to an application for indemnity costs to say, as Aviva did, that the allegations were reasonably made or advanced by experienced and responsible counsel (Farol Holdings v Clydesdale Bank [2024] EWHC 1044 (Ch)).
In support of its argument that it’s conduct did not warrant such an outcome, Aviva submitted that what is required for an order of indemnity costs is conduct that is unreasonable to a high degree, and that a fraud defence supported by credible, lay and expert evidence is not deemed to be speculative, weak, opportunistic or thin simply because it ultimately proves unsuccessful at trial.
It pointed out that the insurance industry is plagued with fraudulent claims and the financial pressures facing businesses both during and following the Covid-19 lockdowns only exacerbated the problem. It submitted that insurers have a duty to challenge insurance claims which appear disingenuous (in whole or in part) otherwise fraudulent claims go unchallenged, premiums across the industry increase and all policyholders suffer. Legally, it pointed out that the Court must be careful not to use hindsight when assessing the strength of an unsuccessful party's case pursuant to Governors and Company of the Bank of Ireland & Anr v Watts Group Plc [2017] EWHC 2472 (TCC).
The Decision
Despite Aviva’s plea, in a judgment handed down on 6 November 2025, Nigel Cooper KC ordered it to pay the Claimants' costs on an indemnity basis, for the following reasons:
- The allegations of dishonesty made by Aviva (that individuals at the Claimant had devised a fraudulent scheme to damage the Claimant’s own property in order to defraud, and had subsequently lied to the court in respect of this) were of the highest level of seriousness.
- Both the Claimant and individuals at the Claimant had suffered financial and reputational harm as a result of Aviva’s allegations.
- Aviva had pursued the allegations through to the end of trial without entertaining settlement discussions with the Claimant.
- The risks associated with making the allegations were reasonably apparent from when they were first raised, given that there was no evidence that the flood had been induced by the Claimant.
- Aviva’s case evolved at trial without any attempt to amend its pleadings.
Implications for Policyholders and Insurers
This case serves as a salient reminder that fraud cannot be pleaded lightly. Aviva’s argument that it has a duty to challenge insurance claims that appear disingenuous is perhaps telling of what is at the heart of an increasing issue in the insurance industry; insurers being too willing to pursue fraud allegations. While there is no suggestion that insurers should not be able to allege fraud in circumstances where there are bona fide reasons to do so, those allegations must be balanced against the damage and harm they cause to policyholders if they prove to be incorrect. The starting point should a holistic assessment, considering all factors before such allegations are pursued, rather than the presumption that any suspicion of dishonesty should lead to a fraud allegation.
For policyholders, the case demonstrates that robustly defending unfounded fraud allegations can lead not only to vindication but also to recovery of costs on the indemnity basis.
An insurer must assess the risk, consider engaging in settlement discussions and ensure that all allegations are appropriately pleaded. Otherwise, it may well pay a significant price.
Authors
Daniel Robin, Deputy Managing Partner