In the case of National House Building Council (NHBC) v Peabody Trust [2025] EWCA Civ 932, when was the employer, Peabody Trust (Peabody), entitled to bring a claim under a National House Building Council (NHBC) policy? Was it when the contractor became insolvent in 2016 or, later, when Peabody had incurred a loss? Was the claim ‘out of time’ or statute barred?
Peabody engaged Vantage D&B Ltd (Vantage) to build a 175-home development at RAF Stanbridge in Bedfordshire and took out an NHBC policy. However, Vantage became insolvent in 2016 before completing the works.
As a result, Peabody employed Stack London as the completion contractor to carry out and complete Vantage’s outstanding work, and practical completion was achieved in January 2021.
On 24 July 2023, Peabody brought proceedings against the NHBC for £913,555.36 being the additional costs which it had sustained in having the works completed as a result of Vantage’s insolvency.
The issue
The NHBC defended the claim based on the timing of it. The NHBC said that Peabody had six years from the date of Vantage’s insolvency in 2016 to bring a claim, so 2023 was too late and the claim was statute barred.
In response, Peabody said its right to bring a claim accrued in 2021, when they had to pay more to complete the homes, not in 2016 on Vantage’s insolvency.
So, the Court had to decide: when did the cause of action accrue under the NHBC policy – 2016 or 2021?
NHBC policy
The Court criticised the NHBC policy wording, stating that whilst it used “user-friendly language”, some parts were “muddled” and "opaque”.
The policy provided cover if the contractor became insolvent before practical completion: ‘This section applies if you lose the amount paid to the contractor ... or have to pay more to complete the building of the home(s), because the contractor is insolvent or commits fraud.
‘We will pay you the reasonable extra cost above the contract price ... for work necessary to complete the home(s)...; or We will reimburse the amount paid to the contractor...’
The Court decisions
The Technology and Construction Court (TCC) agreed with Peabody. They said the event insured against was not the insolvency, but rather the insured being required to pay more above the contract price to complete the works.
The requirement to pay more must be caused by the insolvency, but the insolvency itself was not the risk covered.
The NHBC appealed to the Court of Appeal, however, it agreed with the TCC. It highlighted that the claim hinged on financial loss – “having to pay more" – caused by insolvency (or fraud).
Neither court considered the actual date upon which Peabody’s cause of action accrued, i.e. when it in fact had to “pay more”. That was a question of fact to be decided at a later date.
Analogy: The “event insured against” isn't just the fire that closes your factory; it's the financial loss you suffer because of that fire. Your claim doesn't start the moment the fire is out if you haven't yet incurred the extra costs or lost income. You need to “have to pay more” or “lose income” for the claim to truly accrue.
Implications generally
The Court of Appeal analysed the NHBC policy wording and drew a distinction with conventional property damage clauses where the cause of action arises on the happening of an insured event.
In this case, the relevant event was the financial consequence of the event. Cover applied “if you have to pay more” as a result of the insolvency. The Court said that allied with common sense – otherwise the cause of action would arise at a time (insolvency) when the insured may have no idea whether it would suffer any loss.
Implications for sureties
Sometimes the standard Association of British Insurers (ABI) bond wording is amended to include “insolvency” as a trigger event. The courts have not been asked to consider whether this affects when the cause of action arises under a surety bond.
Of course, this reported case involved an insurance policy, whereas the surety bond is usually construed as a guarantee and executed as a deed so that a 12-year limitation period applies. However, this case may provide a helpful comparison and some context if that issue is ever tested.