The case of Acasta European Insurance Company Limited v Eshiett & Ors [2026] EWHC 71 (Comm) is the latest instalment in a recent spree of judgments on the operation of policy limits under composite insurance policies. The High Court has provided further input on this topic, this time set against the backdrop of structural defects insurance. The judgment will have widespread implications for policyholders, not least given the increasing prevalence of construction claims. Claudia Seeger reviews the decision.

Background

In 2019, homeowners raised complaints regarding defects to a block of flats and a house in North London (the “Properties”). The leaseholds of the flats were separately owned and insured under a structural defects insurance policy (the “Policy”) underwritten by Acasta European Insurance Company Limited (the “Insurer”). While there were disputed issues over the existence and extent of the alleged defects and the remedial work required to remedy them, Acasta sought a preliminary determination of the extent of its liability under the Policy.

For the purpose of the claim, the court assumed there was major damage to the Properties and that cover was triggered. The question turned on the construction of the limits of liability under the Policy. These were expressed to be (i) £1m for “all claims relating to a Residential Property” (“Limit 1”) and (ii) £1.5m for “all Residential Property’s [sic] in one continuous structure” (“Limit 2”). The court was therefore asked to determine whether the aggregate limit of indemnity for all flats was £1.5m, or whether each individual flat had an indemnity of £1m, with no overall aggregate limit shared between the flats.

The Insurer argued firstly that the block was one continuous structure and, secondly, that the flats were all Residential Properties “in one continuous structure”. Consequently, the Insurer argued that Limit 2 applied as an aggregate limit across the Properties and its maximum liability was £1.5m.

By contrast, the leaseholders of the Properties (the “Insureds”) argued that the Policy was a separate policy issued for each flat, with each receiving its own certificate of insurance. This reflects the established position that a composite policy is a bundle of separate insurance contracts (per Liberty Mutual Insurance SE & Ors. v Bath Racecourse & Ors [2025] EWCA Civ 153 (“Bath Racecourse”)). The Insureds contended that if the policy limits were to apply in the aggregate, either a single certificate of insurance should have been issued, or multiple policies should have been issued with a shared aggregate limit. Furthermore, the certificates of insurance referred only to one flat each, and so the flats were not all “in one continuous structure”.

Decision

Following recent case law on this issue, including Bath Racecourse, the court found that the fact that a policy is composite in nature is not determinative in and of itself as to whether limits of indemnity operate in the aggregate or on an individual basis. Instead, the parties must consider the contractual interpretation of the wording of the limits of indemnity.

The court provided a helpful overview of the principles of contractual interpretation, including the positions that the factual matrix of the contract and its negotiations is relevant, and the same interpretation applies to insurance policies as to any other contract (Project Angel Bidco Limited v Axis Managing Agency Limited [2023] EWHC 2649 (Comm) held).

However, the court determined that the factual matrix of the dealings should be limited in this scenario and that more emphasis should be given to the wording of the Policy than to its surrounding context. This is because the Policy was in standard form and was for the benefit of the purchasers of the leaseholds of the flats, their mortgagees and successors in title. Consequently, the court said the rights afforded under the Policy were to be passed on to third parties who would have no input on or knowledge of the previous dealings relating to the Policy. Thus, the factual matrix was of limited importance.

The court therefore focused on the wording of the limits of indemnity. First, it determined that the limit of indemnity for each flat under Limit 1 was clearly £1m, in line with its natural reading and the fact that “Residential Property” was defined as one specific flat.

The key issue was the interpretation of Limit 2. Ultimately, the court held that Limit 2 operated as an aggregate limit shared by all the Insureds in relation to all flats. The court reached this decision on the following bases:

1. It was clear that the reference to “Residential Property’s” should have read “Residential Properties”, not least given that the latter phrase was used elsewhere in the Policy in the plural to refer to other flats. The court also considered the flats to form a single continuous structure.
2. Given the limit of £1m in respect of each flat and the above meaning attributed to “Residential Properties”, including that the flats were in a continuous structure, the natural reading of Limit 2 was that £1.5m is an aggregate limit.
3. An aggregate level of cover for interconnected properties at the same location that were likely to be impacted in the same way by a structural defect was, in the court’s view, unsurprising. The court distinguished the decision in Bath Racecourse, where the limits in a composite insurance policy were found not to be in the aggregate as the relevant insureds were geographically separated and operated in different ways, and thus would have been impacted in distinct ways. This was not the case here.
4. An aggregate level of cover was consistent with the approach adopted in other parts of the Policy, where aggregate levels were set.
5. An aggregate level of cover of £1.5m was unsurprising given that the rebuild cost and sum insured for the whole development was £1.4m.
6. The Policy contained wording dealing with competing claims. Again, the court distinguished Bath Racecourse on this point, where there had been no wording regarding competing claims. In Bath Racecourses, an insured would not have expected their cover to be eroded by claims by another insured, and so the limits were not found to be aggregate.
7. There was no surplus wording. The limits of indemnity were intended to create two limits, one specific to the relevant flat and the other being an aggregate limit across all flats.

Comment

This case is the latest in a breadth of recent case law on the construction and interpretation of limits of indemnity in composite policies and is the first to be considered outside of the context of Covid-19 business interruption losses. Notably, the case differs from Bath Racecourse and Corbin & King Ltd & Ors v Axa Insurance UK Plc [2022] EWHC 409 (Comm), where the construction of those policies resulted in separate limits of indemnity for each insured.

The case further clarifies that the policy wording is the key consideration in determining whether a limit of indemnity under a composite policy operates on an aggregate basis. Parties should consider whether all insureds are likely to be affected similarly by a single cause, taking into account each insured’s location and the nature of their interest. Where businesses or interests are so interconnected that they are affected in the same way, an aggregate limit appears more likely. The judgment will no doubt have ramifications across the construction industry, where insureds are closely located and likely impacted in the same way by the same cause.

The case also acts as a reminder to policyholders of the importance of carefully considering the wording of limits of indemnity in insurance policies at inception. Group companies should take particular care when considering how limits are expressed to ensure the policy accurately reflects each insured’s interests and provides the requisite cover.

You can find further information regarding our expertise, experience and team on our Policyholder Disputes page.

If you require assistance from our team, please contact us.