Property - market insights April 2025

This article was co-authored by Hawanatu Bangura, Litigation Assistant.

Climate change: extreme weather events 

A billion-dollar (US) extreme weather event occurs every three weeks, whereas four decades ago one occurred every four months.   

Gallagher Re reported that extreme weather events in 2024 caused US$402 billion in losses, of which US$151 billion was covered by insurers. These losses are mainly due to significant damage stemming predominantly from fire and water related risks. Insured losses arising from the recent California wildfires are alone estimated to be between US$20 billion and US$30 billion. 

Here, in the UK, the ABI confirmed that in 2024, £585 million was paid out by insurers for weather-related damage to homes and possessions and claims arising from windstorms, flooding and frozen pipes rose by £77 million as compared with the previous 2022 record. 

Flood Re have conducted research which indicates that climate change is expected to increase flood risk further with the number of properties vulnerable to river and coastal flooding rising by 27% by 2069.

The statistics indicate the prevalence of property damage arising from extreme weather events is ever growing causing Flood Re to call on the government for further long-term flood defence investment of at least £1 billion a year to mitigate flood risk. It should be remembered that, with a limited lifespan of 25 years, Flood Re expires in 2039, following which it is intended that insurers should be handling flood risks in a different way by implementing ‘risk reflective pricing’, providing cover based on the actual flood risk of each property.   

Business interruption 

In International Entertainment Holdings Ltd v Allianz Insurance Plc [28.10.24], the Court of Appeal again considered the interpretation of a business interruption policy’s Non-Damage Denial of Access clause, following enactment of the COVID-19 Regulations and the resulting closure of venues. The clause provided cover for losses arising as a direct result of “an incident likely to endanger human life” in consequences where access or use of the premises was prevented or hindered by “any policing authority”.  

The Court of Appeal considered various issues relating to interpretation of the clause including notably, the meaning of “any policing authority” and determined that the term did not cover the Secretary of State for Health and Social Care in their enacting of the Regulations.  

Third Parties (Rights Against Insurers) Act 2010 

Under the Third Parties (Rights Against Insurers) Act 2010 (the 2010 Act), a third-party claimant is entitled to pursue a claim directly against a party’s insurer in circumstances where the insured party incurs a liability to the claimant, but then becomes insolvent.  

In Riedweg v HCC International Insurance Plc & Anor [11.11.24] EWHC 2805, the High Court considered the ability of an insurer, liable to a third-party claimant under the 2010 Act, to pursue another party under the Civil Liability (Contribution) Act 1978 (the Contribution Act) for a contribution to the damages at issue.  

The claimant brought a claim in negligence against the insurer’s policyholder, a property valuer, for losses arising from an overvalue of their property. The policyholder went into liquidation and the claimant pursued the insurer directly under the 2010 Act. The insurer then sought to join the claimant’s solicitors to the proceedings as co-defendants; they argued that the solicitors were also liable to the claimant and that they could therefore be pursued for a contribution, pursuant to section 1(1) of the Contribution Act, on the basis that they were another “person liable in respect of the same damage”. 

The High Court disagreed with the insurer, concluding that if both the insurer and solicitors were liable to the claimant, it was not for “same damage” because the parties did not as required, share  a “common liability”; the solicitors’ liability would if proven, arise from their engagement by the claimants whereas the insurer’s liability arose under the 2010 Act because of their obligations to the (now insolvent) policy-holder under the insurance contract. 

Whilst the decision may initially appear onerous for insurers, it is worth noting that in this case, the insurer had yet to pay out to the claimant and, therefore, had yet to obtain their subrogated right to pursue a claim for contribution in the policyholder’s name. Insurers should take some comfort from the fact that in circumstances where their liability under the 2010 Act has been established and they consequently pay out to a third-party claimant, there will still be an opportunity to pursue a subrogated claim for a contribution against another responsible party. 

We also discuss this case in the Professional liability section.

The 2010 Act was also considered in the recent case of Scottish Gas Networks plc v QBE UK Ltd and others [24.10.24]

In this case, the Scottish Court of Session (Inner House) examined whether or not a claimant could establish the insured party’s liability to them under section 1(4) of the 2010 Act, by reference to a default judgment against the insured party. The Court held that it could; the insured’s liability had already been established by the default judgment and there was no need for the merits of the claim to be considered. 

The decision may have been made by a Scottish court, but it will likely be considered persuasive by the English courts. It follows that should a default judgment be made against a policyholder; insurers will likely only be able to rely on coverage arguments in order to defend a claim under the 2010 Act.   

For insurers, the case underlines the risk involved when a policyholder faces both a dispute and insolvency, and the importance of effectively managing such cases at an early stage.