Policy covers cost of repairing damage caused after period of insurance

A property insurance claim is not at common law a claim to enforce a promise to pay money but a claim for unliquidated damages. The Court of Appeal has considered this in Sky UK Ltd and another v Riverstone Managing Agency Ltd and others [2024] EWCA Civ 1567. The case concerned claims under a construction all-risks policy underwritten by the defendant insurers for extensive water damage to the roof of Sky’s global headquarters building, Sky Central in Osterley, West London. The policy provided that: the insurers would indemnify the insured against physical loss or damage to the property occurring during the period of insurance (POI), from any cause whatsoever, the insurers would indemnify the insured on the basis of the full cost of repairing, reinstating or replacing property lost or damaged; and the POI was the period running until completion of the works and a maintenance period of one year thereafter. The roof was made up of 472 individual wooden cassettes. During the construction – the POI – water had entered and remained in many of the cassettes leading to wetting of internal timbers and irreversible swelling and structural decay. Further damage occurred after the POI as a result of wetting which occurred during the POI: already wet or damaged timbers deteriorated and there was development by way of spread to additional parts of timbers. Sky claimed the cost of addressing all damage to the roof structure including deterioration and development damage. The judge rejected the insurers’ claim that damage required a physical change which impaired the structural performance and integrity of each cassette. A tangible physical change which impaired the commercial value of the property was sufficient. There was such damage but Sky was only entitled to indemnity for the repair of damage which existed at the end of the POI, not deterioration or development occurring afterwards. The Court of Appeal allowed Sky’s appeal on the extent of the damage covered by the policy. A contract of insurance against damage to property is a contract of indemnity. The insurer is in breach of that obligation as soon as the damage occurs Connect Shipping Inc v Sveriges Angfartygs Assurans Forening (The Renos) [2019] UKSC 29 and is then required to pay damages for breach of contract to put the insured in the position as if the breach had not occurred, subject to any express policy terms. The wording of the policy covered the costs of remedying the foreseeable deterioration and development damage occurring after the POI resulting from insured damage occurring during the POI. Louise Clark is a property law consultant and mediator