Key lessons on limits of liability from Acasta v Eshiett

When a structural defects claim lands on your desk for a multi-unit residential development, the question of whether your liability is capped at an aggregate limit or multiplied across every individual unit can be the difference between a manageable exposure and a catastrophic one. 

The Acasta v Eshiett case confronted exactly that issue. Its findings on policy construction, aggregate limits, and the limits of the composite insurance are essential reading for every insurer writing structural defects or residential warranty cover.

The facts

• Cite Construction Limited constructed and insured an apartment block in Camden, London, comprising seven flats. 
• Insurance Period Certificates ('IPC(s)') were issued for each flat individually by an agent of Acasta.
• The defendants, each holding an interest in a flat, argued that separate cover existed per unit, giving rise to a potential limit of £1m per unit – a total exposure of £7m. 
• Acasta contended that an aggregate cap of £1.5m applied to the entire block.

The decision

The Court found in favour of Acasta. Whilst the per unit limit of £1m applied to individual flat claims, the relevant wording: “the limit for all claims for all Residential Properties in one continuous structure is £1.5m”, created a clear aggregate cap for the whole block. 

The Court noted that this was commercially sensible (given that the total rebuild cost of the development was stated to be £1.4m) and that the aggregate approach was consistent with the limits structure adopted across all other sections of the policy.

Key lessons for insurers

• Aggregate cap provisions will be upheld if clearly drafted: even where separate IPCs are issued per unit;
• Consistency across policy sections is important: the Court drew support for its construction from the fact that aggregate limits were used consistently throughout the policy;
• The composite/individual policy distinction is not determinative: What matters is the proper construction of the limit of indemnity wording, not how the arrangement is characterised; and 
• Standard form residential warranty policies will be construed primarily on their text: with limited scope for factual matrix arguments, given the range of unknown third party beneficiaries.

Key lessons for policyholders

• Separate certificates do not mean separate limits: purchasers of units in multi-unit developments must review aggregate cap provisions carefully, as a structural defect affecting the whole building may exhaust the aggregate limit before all individual claims are satisfied.
• Express aggregate wording overrides the Liberty Mutual presumption: where policy wording expressly provides for a shared aggregate limit, policyholders cannot rely on the principle that one insured’s claim should not erode another’s limit.

Conclusion

This case confirms that whether aggregate or per-unit limits apply turns substantially on the textual content of the policy wording. Clear, consistent drafting - aligned with the total rebuild cost of a development - remains the most effective protection against disputes of this kind.