Lloyds Insurance Company SA v Financial Services and Pensions Ombudsman

• Jurisdiction: Ireland
• Judge: Mr. Justice Allen
• Judgment Date: 22 May 2023
• Neutral Citation: [2023] IECA 122
• Court: Court of Appeal (Ireland)
• Docket Number: Appeal Number: 2022/196

In the Matter of Section 64 of the Financial Services and Pensions Ombudsman Act 2017

Between

Lloyds Insurance Company SA

Appellant

and

Financial Services and Pensions Ombudsman

Respondent

and

Joanna Donnelly and Harm Luijkx

Notice Parties

[2023] IECA 122

Whelan J.

Noonan J.

Allen J.

Appeal Number: 2022/196

THE COURT OF APPEAL

CIVIL

Insurance – Error of law – Financial Services and Pensions Ombudsman Act 2017 s. 60(2)(c) – Appellant appealing against the respondent’s decision directing the appellant to repair damage and to pay compensation – Whether the High Court made an error of law

Facts: The notice parties, Ms Donnelly and Mr Luijkx, in 2006, bought a new house in Portmarnock, County Dublin. The house came with a policy of insurance called Premier Guarantee for Ireland which was originally issued by a Liberty syndicate at Lloyd’s but was later taken over by the appellant, Lloyd’s Insurance Company SA, which provided indemnity against structural defects first discovered within ten years from the date specified in the final certificate for the house. Soon after the notice parties moved in to their new house, they noticed cracking in the lower walls, and later in the upper walls and ceilings. In 2014 the notice parties made two claims on foot of the policy, the first for pyrite damage and the second in respect of damage to the roof and walls. The pyrite claim was admitted and the house remediated. The roof claim was declined on the basis that it was not covered by the policy. On 26th April, 2017 the notice parties made a complaint to the respondent, the Financial Services and Pensions Ombudsman, the substance of which was that it was clear in the insurance documents that the policy was to cover damage to the structure of their house. On 24th July, 2020, following an investigation, the respondent issued a final decision directing the appellant to repair the damage and to pay compensation to the notice parties in the sum of €20,000 for the inconvenience caused. An appeal by the appellant to the High Court was dismissed for the reasons given in a written judgment of Phelan J on 19th May, 2022 ([2022] IEHC 290) but by leave of the High Court the appellant applied to the Court of Appeal to review the decision on three certified questions of law: “1. Was it an error of law for the High Court to uphold one aspect of a decision which the [respondent] made on foot of contradictory findings namely: (i) A finding per s. 60(2)(b) and s. 60(2)(g) of the [Financial Services and Pensions Ombudsman Act 2017] that the Provider was in breach of policy in not providing cover; and (ii) A finding that the provider acted in accordance with law for the purposes of s. 60(2)(c) of the Act of 2017? 2. For the purposes of determining whether a claim fell within coverage under the Policy, did the High Court make an error of law in failing or refusing to draw a distinction between the Structure as defined in the Policy (including roof trusses) and ‘roofing structure’ nowhere defined in the Policy? 3. Did the High Court fall into error by finding that the Policy could be interpreted by reference to how a reasonable person would expect trusses to perform?”

Held by Allen J that the premise of the first question was wrong; the respondent did not make a finding that the appellant acted in accordance with law in not providing cover and his erroneous reliance on s. 60(2)(c) did not amount to such a finding. Allen J held that once it is recognised that the prefabricated trusses were not, as they were delivered to the site, fit for the purpose for which they were intended, it must be plain that the respondent was entitled to have come to the conclusion that the damage caused by the inadequate support of the tanks resulted from a defect in the design, construction and workmanship of the load bearing part of the roof, as provided for in the policy. Allen J held that the High Court judge was entitled to have come to the conclusion that the respondent’s conclusions were reasonably open on the evidence. Allen J noted that the appellant did not say that the judge was not entitled to contemplate whether a reasonable person would have expected a policy of insurance against structural defects to have responded to damage caused by a structural defect in the load bearing part of the roof. It seemed to Allen J that to contemplate that a reasonable person would have expected the structural parts of the roof would be free from a defect which would cause such damage is simply the converse. He saw no error.

Allen J held that the appeal must be dismissed. He held that the respondent was entitled to an order for his costs of the appeal.

Appeal dismissed.

NO REDACTION NEEDED

JUDGMENT of Mr. Justice Allen delivered on the 22 ^nd day of May, 2023

Introduction

1 . In 2006 Ms. Joanna Donnelly and Mr. Harm Luijkx (“the notice parties”) bought a new house in Portmarnock, County Dublin, for use as their principal private residence. The house came with a policy of insurance called Premier Guarantee for Ireland which was originally issued by a Liberty syndicate at Lloyd's but was later taken over by Lloyd's Insurance Company SA (“the appellant”) which provided indemnity against structural defects first discovered within ten years from the date specified in the final certificate for the house.

2 . Soon after the notice parties moved in to their new house, they noticed cracking in the lower walls, and later in the upper walls and ceilings. The cause of the cracking in the lower walls was established to be heave, which was attributed to the presence of pyrite in the fill. The cause of the cracking in the upper walls and ceilings was established to be that the roof of the house had sagged, pushing out the upper walls.

3 . In 2014 the notice parties made two claims on foot of the policy, the first for the pyrite damage – which was classified by the claims handler as “Pyrite Claim” – and the second in respect of the damage to the roof and walls – which was classified by the claims handler as “Structural Claim.”

4 . The pyrite claim was eventually admitted and the house remediated. The roof claim, however, was declined on the basis that it was not covered by the policy.

5 . On 26 ^th April, 2017 the notice parties made a complaint to the respondent, the substance of which was that it was – they said – clear in the insurance documents that the policy was to cover damage to the structure of their house, and that there was damage to the structure of their house, so they had assumed that it would all be fixed. They wanted, they said, the Financial Service Provider (they meant the then Financial Services Ombudsman):-

“… to adjudicate on the difference of interpretation of the policy. OSG [the loss adjuster] say they acknowledge major structural damage has been done to my housing unit but refuse to fix the issue. My engineer and original builder agree that damage is covered by the policy.”

6 . On 24 ^th July, 2020, following a protracted investigation, the Financial Services and Pensions Ombudsman (“the respondent”) issued a final decision directing the appellant to repair the damage and to pay compensation to the notice parties in the sum of €20,000 for the inconvenience caused.

7 . An appeal by the appellant to the High Court was dismissed for the reasons given in a written judgment of Phelan J. on 19 ^th May, 2022 ( [2022] IEHC 290)] but by leave of the High Court the appellant has applied to this court to review the decision on three certified questions of law.

8 . The notice parties were duly given notice of the appeal to the High Court and of the application to this court but, seeing the gathering storm, they decided to batten their hatches and wait for the outcome of the litigation between the appellant and the respondent.

The dispute

9 . The notice parties' claim, as set out in their correspondence with the loss adjuster and on the complaint form, was that there was structural damage to their house for which they had insurance and they wanted it fixed. The insurer's position was that the admitted major structural damage was not covered by the policy.

10 . The seeds of the dispute were sown in an engineer's report commissioned by the notice parties in 2014 and which was submitted in support of the claim. The roof of the notice parties' house was constructed with prefabricated trusses. These are made up of rafters, posts, struts, and chords. They are designed and constructed to carry the weight of the roof tiles but not, unless modified by the addition of bearers and spreaders, to take the weight of water tanks. The notice parties' engineer in his initial report identified the cause of the damage as a defect in the trusses but the appellant was – and remains – adamant that there is nothing wrong with the trusses. Rather, it is said, the cause of the damage is the positioning of the water tanks in the attic and what the appellant contends is the “unintended” load on the chords. The question that immediately springs to mind is, well, unintended by whom? I think that it must be a safe assumption that the manufacturer of the prefabricated trusses did not intend that they would be used – without the addition of bearers and spreaders – to support water tanks: for the good and sufficient reason that they were not designed and constructed to do so. However, the water tanks were installed and positioned by the builder and unless the builder intended that the roof would sag and deflect the walls – and it is not suggested that it did – the builder must have intended that the trusses could support the load.

11 . Annexed to the notice parties' engineer's report of 28 ^th May, 2014 were, in Annex A, a number of photographs of cracking, and in Annex B, a drawing showing a cross section of two water tanks and the existing trusses. It was said in the body of the report that the engineer had conducted a...