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Under French law, a construction defect will, in principle, be of a decennial nature if it causes damage to the structure of a building itself and makes it unfit for its intended purpose. Alternatively, the defect will be of a decennial nature where the defect affects a structure’s stability.
However, while the defect should, in principle, be to the structure itself, it may, in some circumstances, extend to items of equipment installed on an already existing structure.
In this matter, the defendant construction company, l’Univers de la Cheminée (UC), installed a fireplace insert in a residential property. On 13 February 2023, a fire broke out, destroying the fireplace and all furniture located around it.
The property owners – along with their property insurer SwissLife - brought a legal action against UC and AXA, its decennial liability insurer, on the basis that the fire was the result of poor installation of equipment, namely, the fireplace insert.
UC was found liable for the damage and ordered, together with its decennial liability insurer AXA on appeal, to pay damages to the property owners totaling €79,308.06 and €142,610 to SwissLife, their insurers.
AXA challenged this ruling before the French Supreme Court, arguing that the damage was not a decennial liability and was therefore not covered under the decennial liability policy. This was because the defect did not result from the construction works itself but arose from the original existing structure during which, an item of equipment was installed.
Supreme Court Ruling
The French Supreme Court granted AXA’s challenge and overturned the Court of Appeal ruling, putting an end to a 7-year trend implemented by French courts whereby the decennial liability regime was applied to all defective equipment that made structures unfit for its intended purpose, regardless of whether it was separable or not from the structure, originally part of the structure or subsequently installed.
Following on from this Supreme Court judgment, if the defective equipment, installed by way of replacement or by addition to an existing structure, does not amount to construction work (i.e. the equipment is merely installed but not built), it should not be subject to the decennial liability regime but to the general, standard 5-year statute of limitation applicable to contracts.
Comment
The standard applied by the French courts since 2017 was meant to widen the scope of the decennial liability regime. However, French case law now seems to be returning to a stricter standard.
This decision is relevant for decennial liability and civil liability insurers as, subject to a claim being made regarding installation of equipment to the existing structure, it will either possibly trigger a construction company’s decennial liability policy or its professional civil responsibility insurance policy.
If it is a decennial liability issue, coverage is mandatory under French law and leaves little room for the insurer to refuse coverage. By contrast, if it is a professional liability issue, then coverage is left at the construction company’s choice. If taken up, the insurer is then free to provide policy exclusions.
Construction and engineering
Insurance and reinsurance
France