Liability insurers are seeing a dramatic increase in claims arising from allegedly defectively installed cavity wall insulation. Tom Corrigan, partner at DAC Beachcroft, asks whether there is cause for concern.
Claims against the companies that installed CWI have been around for a number of years and relate back to when an estimated six million homes started to be fitted with CWI, funded by grants as part of the government’s initiative to improve energy efficiency. The recent spike in claims would appear to coincide with more claimant law firms targeting these claims as payment protection insurance claims come to an end.
Potential claimants are being identified through various techniques, including cold calling in neighbourhoods where there was a large take-up of the government grants. Hot spots are typically on the west coast of England and Wales in locations exposed to south westerly driven wind and rain. Properties in these locations would always have been vulnerable to damp problems associated with driven rain, particularly if the property was not well maintained.
The concern for insurers is not only that the number of claims is rising, but the values of the claims are also increasing, with some being deliberately inflated and, more worryingly, some even fabricated.
The claims presented sometimes include personal injuries, as a result of the claimant allegedly having had to live in damp and mouldy environments, as well as for damage to property caused by the damp proof course being bridged.
Many of the installations were undertaken several years ago and the time lapse between the original CWI being installed and the claims materialising means that the policy indemnity and legal liability issues are not straightforward. The problems for insurers are compounded by the fact that many of the companies that carried out the installations are no longer trading. This can cause evidential issues in establishing the circumstances in which the original work was undertaken.
Insurers must establish when damage occurred to assess whether policy cover is triggered and, if there has been a change of insurer, which insurer is on risk. Claimant lawyers are taking an increasingly aggressive stance to obtain pre-action disclosure of policy documents.
Professional indemnity insurers also have a potential exposure as properties needed to be surveyed in order to obtain the government grant. In many claims, it is alleged that the property was unsuitable for CWI, so the surveyor who carried out the survey could be potentially liable.
An added complication is that CWI work was often backed by an industry-funded Cavity Insulation Guarantee Agency guarantee. Typically, claimant lawyers are not making claims under the guarantees because of the perceived limitation of cover.
While it’s not clear whether this is a spike or just the tip of the iceberg, the concern for insurers is that if these claims do become the focus of a sustained campaign by claimant lawyers, the claims could become more numerous and be with insurers for many years.
Formulating a consistent strategy to defend these claims, particularly those with doubtful merit, will be crucial.
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