Owners of 'unsafe' Manchester flats win appeal against insurer

9 December 2019

New Lawrence House (image: Google Street View)

The owners of a block of flats in Manchester where the fire brigade identified serious safety failings and ordered residents to evacuate have won a legal appeal to make the insurer pay for remedial works.

The 104-apartment New Lawrence House, developed by JCS Homes, now in liquidation, was marketed as an “outstanding investment opportunity” but residents were prohibited from living there in 2017 after the fire services determined that the building was unsafe in the wake of the Grenfell Tower disaster.

The building’s owners were left with a multi-million-pound bill for its remediation and launched a claim against insurer Zurich, which had issued a new home building warranty on the property.

Among the alleged breaches of Building Regulations at the property was a lack of flame retardant on the five-storey building’s steel structure, as well as inadequate fire stopping and inadequate smoke ventilation to escape stairs and lift lobbies. Some balconies were also missing which meant French windows opened out onto a drop to the ground.

In the original high court case, Zagora Management Ltd v Zurich Insurance Plc, judge Stephen Davies found that the claimants were only entitled to recover around £3.6m due to the insurance policy’s maximum liability clause (MLC), despite the fact that remedial works were valued at £9.7m.

Appeal court

But a specialist legal team made up of barristers from Keating Chambers and lawyers from Walker Morris, representing the building’s freeholder and the owners of 30 of the 104 flats, took the case to the Court of Appeal where Sir Rupert Jackson found that the MLC limits the claimants’ claims to the total purchase price of all flats in the development, which is £10.8m, so that most of the cost of remedial works can now be recovered.

The liability for the money now lies with East West Insurance, after Zurich transferred its building guarantee insurance business to the firm in 2018.

Martin Scott, head of the Walker Morris construction and engineering group said: “This is a landmark in a long, hard-fought battle, which has caused considerable stress and worry to our clients. I am now hopeful that the Court’s decision will finally see Zurich face up to its responsibilities.”

A Zurich spokesperson said: “We note the outcome of the recent Court of Appeal case arising out of a dispute between East West and the leaseholders of New Lawrence House.

“The proceedings relate to Zurich’s former building guarantee book of business, which East West purchased in 2018.  As such, it is East West, not Zurich, which is responsible for the court award of £10.7m.    

“We recognise that the leaseholders of New Lawrence House have faced a long and difficult journey to obtain a resolution, and hope that the recent judgement against East West brings some certainty to them.

“Earlier this year, the High Court also ruled on issues relating to Zurich’s former building control services. Although the court found that Zurich Building Control Services had no liability to the leaseholders, we regret that there were elements of the services that did not meet the standards we would expect.”

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