"Accidentally" Crossing The Boundary: The High Court Holds That A Property Developer's Trespass And Nuisance Onto A Neighbouring Property Was Not "accidental" For The Purpose Of A Public Liability Policy

• Published date: 13 June 2023
• Subject Matter: Insurance, Insurance Laws and Products
• Law Firm: Gatehouse Chambers
• Author: Mr Tom Bell

(MacPhail v Allianz Insurance)

Mini-Summary

Marcus Smith J has upheld the decision of HHJ Parfitt at first instance, rejecting a claim by Mrs and Mrs MacPhail under an insurance policy covering liability for "accidental" nuisance or trespass. The liability arose because the MacPhails' basement extended beyond the boundary line of their neighbours' property. The basement was built by a developer, and it was the developer who took out the insurance policy. Policy coverage extended to the MacPhails, but only if the developer would itself have been entitled to indemnity. It follows that the issue of whether the nuisance and trespass were "accidental" fell to be judged from the perspective of the developer. Although HHJ Parfitt found as a fact that the developer genuinely (albeit wrongly) believed that the basement would not go over the boundary, he also found that the developer knew there was a risk it was wrong about this. The judge thus concluded that the trespass was not "accidental", meaning that the Policy was not triggered. On appeal, Marcus Smith J upheld this conclusion.

What are the practical implications of this case?

The key issue in the case was whether the developer's trespass onto the neighbours' property was "accidental". The insured argued that because, as the trial judge found, the developer believed there would be no trespass, it necessarily followed that the trespass that in fact occurred was "accidental". Marcus Smith J rejected this argument. He said that to determine whether a trespass was "accidental" required a more nuanced inquiry, critical to which was the trial judge's finding that the developer "willingly" took the risk of trespass. This meant that the trespass fell outside the realm of an "accident" and therefore outside the scope of cover.

The practical implication of this case is that property developers will not be covered by their public liability insurance if they willingly or knowingly take the risk that they are building on land which is not theirs. This is so, even if they genuinely believe that the land in question is theirs. What should developers do if faced with such a dilemma? In short, they should seek to agree with the neighbouring landowner where the boundary lies; and if no agreement is possible, they should take legal advice. They will only benefit from insurance that covers "accidental" trespass if they can demonstrate that they were either unaware of the risk of trespass or, having become aware, had gone on to...