Does Your Insurance Policy Guard Against the Risks You Want Covered?

Insurance policies are replete with small print and it is always worth getting a lawyer to check that they cover the risks that you wish to guard against. In one case exactly on point, policy exclusion clauses led to the dismissal of a university’s £10 million claim in respect of catastrophic damage to a student accommodation block.

The block was built in the 1990s on the site of a disused brewery, close to a canal. It had been in place for just over 15 years when large cracks suddenly appeared in internal walls and ceilings and it had to be evacuated. Investigations revealed that concrete blockwork below ground level had been ‘turned into mush’ by flowing groundwater. The entire block subsequently had to be demolished.

The university launched proceedings against its insurers after the latter declined to cover the loss in reliance on a number of exclusion clauses. In rejecting the claim, the High Court ruled that the damage to the block could not be viewed as accidental. The flow of groundwater had been constant from the block’s completion to the date on which the cracks appeared and there had been no sudden flood.

At the time the policy was entered into – just four months before the cracks appeared – the collapse of the blockwork was inevitable and there was nothing that could have been done to save it. The cause of the damage was gradual deterioration over at least a decade. The Court found that the block would still have been standing had it not been for its faulty or deficient design. Groundwater was a known and predictable problem that had not been addressed and the block’s design was in that respect not fit for purpose.