Vivid Housing v Allianz: Interpreting imminent threat in warranty insurance claims

In the Technology and Construction Court, Mrs Justice Jefford partially granted Allianz's application for summary judgment in a dispute about coverage under a Housing Warranty Insurance Policy for defects in a block of 82 flats in Portsmouth owned by Vivid Housing Limited.

Background

Vivid claimed under the policy for five alleged defects:

1. Combustible Rockpanel cladding.
2. Missing or defective vertical. 
3. Horizontal cavity barriers.
4. Inadequately fixed cladding bracketry.
5. Building debris in cavities.

The claim was notified in May 2020, shortly before the 12-year policy period expired, following a façade fire risk assessment. Allianz sought summary judgment, arguing that none of the defects were covered by the policy.

The key issue

The central issue was how to interpret clause 3(a)(iii) of the policy. This clause provided cover for the cost of repairing premises following defects causing "the threat of imminent destruction or physical damage to the premises which requires immediate remedial measures for the prevention of destruction or physical damage within the Period of Insurance."

Allianz argued that the policy only responded where the property destruction or damage itself was imminent (in other words, sufficiently likely to happen sufficiently soon) and required immediate remedial measures to prevent it occurring within the policy period. On Allianz's case, the fire-related defects (defects 1, 2, 3 and 5) could only cause damage if there was a fire, and there was no evidence that fire was imminent.

Vivid argued that the clause applied where a reasonable observer would conclude there was a realistic prospect of physical damage requiring immediate remedial measures. For the fire-related defects, the building's vulnerability to catastrophic damage in the event of fire was sufficient.

The Court's decision

Mrs Justice Jefford held that "imminent" included a timing element. The threatened damage must be "sufficiently likely to happen sufficiently soon." However, the critical question was whether it would be commercially sensible to require the insured to prove an imminent threat of fire itself, rather than imminent damage once fire occurred.

The Court found that it would not make commercial sense to require proof that a fire was about to break out. Given the constant nature of fire risk, and the fact that Vivid had put in place a waking watch (showing concern about the consequences of fire), the Court concluded that Vivid had a real prospect of proving that a reasonable observer in August 2019 would conclude there was a serious risk of fire occurring sufficiently soon to amount to a threat of imminent destruction or damage.

Therefore, summary judgment was refused for defects 1, 2, 3 and 5 (the fire-related defects).

However, the Court took a different view on defect 4 (the cladding bracketry). This defect was more like structural deterioration over time. There was no evidence that detachment was imminent, and Vivid had taken no steps to guard against the risk. Summary judgment was granted to Allianz on this defect.

Key takeaways for insurers

Fire-related defects and "imminent" damage

The court confirmed that "imminent" has a timing element - damage must be sufficiently likely to happen sufficiently soon. But crucially, the court rejected Allianz's argument that insureds must prove fire itself is imminent. Where fire risk is constant and defects make the building vulnerable to catastrophic damage if fire occurs, that can be enough to trigger coverage. The court took a commercially sensible approach - requiring proof that a fire is about to break out would make the coverage practically worthless.

Structural deterioration is different

For defects involving progressive deterioration (like the bracketry issue), insureds must show that failure is actually imminent, not just possible at some point in future. Without evidence of actual deterioration or protective measures being taken, these claims are vulnerable to summary judgment.