Insurance dispute between Peabody and NHBC heads to court after judge refuses strike out claim

A dispute between Peabody and NHBC will go to trial after a High Court judge rejected the argument that the housing association had left it too late to bring an insurance claim.

According to the claimant’s lawyers, the judgement could provide clarity in future cases involving insolvency insurance.

The case centres around a housing scheme at the former RAF Stanbridge site in Bedfordshire.

Housing association Catalyst, which merged with Peabody last year, agreed an insurance policy with NHBC at the time against risks associated with 88 affordable homes being built as part of that scheme.

Vantage was appointed in November 2015 to build the 175-home development for £24m, with the sum for the affordable component worth a little over £10m.

The contractor began work in December 2015, but went into administration the following June.

Under the insurance policy, Catalyst had the benefit of cover if it had to pay more to complete the units because of an insolvency, but a claim was not issued until July 2023, when Peabody requested £914,000 plus interest. 

NHBC’s legal team argued that the claim was statute-barred by virtue of six years having passed since the administration. 

While it asserted that the cause of action ‘based on the insolvency of Vantage’ would have accrued on the date of insolvency, Peabody disagreed, holding that the cause of action accrued on the date on which Catalyst had to pay more for the relevant units to be completed.

A hearing over the issue took place on 7 June 2024.

In a judgement handed down today (Wednesday) in the Technology and Construction Court, Andrew Mitchell KC, sitting as deputy judge of the court, sided with Peabody.

“I […] dismiss the Application, on the basis that time did not start running on the insolvency of Vantage on 29 June 2016 but at a time (to be determined at trial) when Peabody had to pay more to complete the units, as a result of that insolvency,” he said.

>>See also: Peabody development falls more than 40% as it focuses on ‘getting the basics right’

William O’Brien, from Devonshires who represented Peabody, said: “This is an important decision that clarifies when time begins to run for the purposes of NHBC insolvency cover. NHBC’s position was that time begins to run from the point of contractor insolvency, rather than when money over and above the original contract sum is incurred to complete the works. 

“The court held the NHBC’s position is wrong and that limitation does not run from the point of original contractor insolvency. 

“With the recent rise in contractor insolvencies affecting the sector, employers will be increasingly turning to insurers like NHBC, and this judgement clarifies the period within which they can do so.”

The claim will now continue to trial absent any appeal by NHBC.

A spokesperson for Peabody said: “We are pleased with this decision, which we think is fair.” NHBC declined to comment.