Builders Liability Insurance and Ancillary Activities
19th Sept 2024
A recent case in the French courts considered the scope of general liability insurance for a builder undertaking works of an ancillary nature.
Builders in France are required to hold professional public liability insurance (assurance responsabilité civile professionnelle) for their activities.
They should also hold an insurance policy for the statutory 10-year latent defects guarantee for major works. The legal obligation is called the 'responsabilité décennale' and the insurance policy the 'assurance décennale'.
Only activities declared by the insured fall within the scope of the insurance policies, and it is for the builder to properly declare those activities.
The issue is one that is a frequent cause of litigation, as the law is imprecise, with court judgements that have gone different ways, depending on the facts of each case.
In the recent case, the owners of a house entrusted a builder with the supply and installation of a wood burning stove. The company subcontracted the installation of the flexible ducting on the stove.
Following completion of the works a fire broke out in the dwelling, which gave rise to compensation by the builder's insurer who subsequently sued the builder and their insurer for reimbursement of the compensation paid.
In turn, the builder and their insurer sued the subcontractor who had installed the ducting, as well as their insurer.
The court of appeal sitting in Grenoble ordered the subcontractor to compensate the insurer in the sum of €271,724, and to also pay compensation of €119,124 to the owner of the property.
The subcontractor's warranty claim against their own insurer was dismissed on the grounds that the policy did not cover the activities associated with the maintenance of chimneys, including the construction of systems for the evacuation of combustion products, which had a distinct listing in the insurance conditions. The policy taken out by the subcontractor covered plumbing, sanitary installations, as well as thermal HVAC installations, including chimney sweeping and aerothermal energy.
The subcontractor appealed the decision in the French Supreme Court, the Cour de Cassation, in support of which they stated that their activity was more widely defined in the annex of the policy to include "the construction of heating and cooling installations (production, distribution, evacuation)."
As a result, the court quashed the decision of the lower court, stating:
"By making this determination, without investigating whether the installation of a pipe for the casing of a wood stove was not included in activity "thermal climate engineering installations" declared by the insured, given the definition of this activity in the nomenclature annexed to the special conditions of the insurance contract, i.e. "the construction of heating and cooling installations (production, distribution, evacuation)", the Court of Appeal did not give a legal basis for its decision."
The court considered that the exclusions contained in the insurance contract cannot have the effect of emptying the policy of its substance and that the protection offered by the contract must have regard to the sector in which the insured was engaged, albeit that the insured must comply with all technical processes and regulations.