Hodgson V National House Building Council - Reinstatement

Judge considers whether insured is required to reinstate property

The claimant's bungalow was constructed by a builder and the property had the benefit of an NHBC Buildmark policy which, broadly, provided that NHBC would pay, in certain circumstances, the cost of remedial works. By the time of the claim against the NHBC in this case, the claimant had sold the property without carrying out any remedial works.

One of the defences advanced by the NHBC in defence of the claim was that the claimant had suffered no recoverable loss because he will never now incur the costs of remedial works. It was argued that the NHBC policy was a contract of indemnity, covering loss suffered by the claimant, but diminution in the property's value was said to be expressly excluded.

Reference was made to the case of Great Lakes Reinsurance v Western Trading, in which the insured sought the cost of reinstatement from property insurers in circumstances where the insured had no intention of reinstating and the value of the property had increased as a result of the fire. Clarke LJ had said, obiter, that "I doubt whether a claimant who has no intention of using the insurance money to reinstate, and whose property has increased in value on account of the fire, is entitled to claim the cost of reinstatement as the measure of indemnity unless the policy so provides".

That view contrasted, though, with the view in Colinvaux's Law of...