The Commercial Court’s decision in Mode Management Ltd & Anor v AXA Insurance UK plc [2025] EWHC 2035 (Comm) is a helpful restatement of a principle that policyholders sometimes overlook: the limitation clock for first‑party property damage starts ticking on the day of the loss, not the day an insurer declines the claim. 

The judgment also emphasises that equitable remedies cannot be used to circumvent limitation rules.

Background

On 7 February 2018 a fire damaged and destroyed two industrial units owned by Mr Tregunno, the sole director of Mode Management Ltd (“Mode”). Mode was the named policyholder of a Property Investors Protection Plan underwritten by AXA. 

Following investigations, AXA purported to avoid the policy ab initio due to alleged misrepresentation and non-disclosures by Mode prior to inception of the policy. Mr Tregunno and Mode challenged this decision through two complaints to the Financial Ombudsman Service however, both were unsuccessful.

On 26 September 2024, over 6 years after the loss had occurred, Mr Tregunno and Mode (together “the Claimants”) issued proceedings seeking specific performance of the insurance contract. The Claimants also argued that AXA had breached section 138D of the Financial Services and Markets Act 2000 (“FSMA”) by unreasonably rejecting their claim; as well as advancing a claim under section 83 of the Fire Prevention (Metropolis) Act 1774, which was dependent on the claim for specific performance in any event.

AXA applied for summary judgment to dismiss the claim on the grounds that it was time-barred under section 5 of the Limitation Act 1980, had no real prospects of success, and that Mr Tregunno had no claim given that he was not named on the policy.

The Claimants accepted that Mode’s common law claim for damages for breach of contract was time-barred but sought to bypass AXA’s limitation defence by advancing a claim for specific performance, requiring AXA to put Mode into the position it would have been pre-loss by reinstating the damaged property. 

The Claimants’ argument was that a claim for specific performance is not barred by limitation and can be pursued as an equitable remedy distinct from the time-barred common law damages claim. The Claimants referred to the ‘hold harmless’ principle recently examined in the Court of Appeal in Sky v Riverstone [2024] EWCA Civ 1567 which clarified that an insurer’s primary obligation is to hold the insured ‘harmless’ against the occurrence of insured damage. An insurer’s secondary obligation kicks in once the insured damage takes place and requires the insurer to pay damages to the insured. 

The policy in question contained a provision entitling AXA to elect whether to indemnify the insured by payment or to reinstate the damaged property itself. The Claimants referred to the decision of the High Court in Callaghan v Dominion Insurance [1997] 2 Lloyd’s Rep 541 which established that in policies which allowed the insurer to elect between these options, there arises two separate liabilities which the insurer could choose. The Claimants argued that in purporting to avoid the policy, AXA had not yet elected between the two liabilities. The Claimants argued that the policy had not been effectively avoided and therefore both options remained open to AXA. Given that common law damages were time-barred their claim was for specific performance of AXA’s separate liability to reinstate the insured property.

AXA’s argument was that the ‘hold harmless’ principle does not postpone limitation, nor does it transform the nature of the claim so as to create a later enforcement date. In response to the Claimants’ argument that AXA’s option to reinstate triggered a secondary obligation, AXA argued that the option to reinstate was simply an alternative method of performing the indemnity and did not create a deferred or continuing obligation that would delay limitation, nor did it create a fresh contract or new cause of action which would justify specific performance as a workaround to the limitation period. 

Decision

The court found in favour of AXA, granting their application for summary judgment and striking out all of the Claimants’ claims. The court found that both the right to claim under the policy and to damages arose on the date of the fire and that the claim for damages was statute-barred.

The court agreed with AXA that the option to reinstate did not postpone liability and that that the decision in Callaghan was not intended to create a separate route to liability. 

Whilst the court did not outright preclude the possibility of specific performance being available in respect of an indemnity policy, it reasoned that damages are an adequate remedy in insurance claims and that allowing specific performance to avoid limitation would conflict with common law principles. In addition, the court considered that Mode had no real prospect of defeating the defence of laches given the unexplained delay in bringing the claim and the potential prejudice to AXA caused by such delay.

As to the FSMA claim, the court determined that Mode did not meet the definition of a ‘private person’ under Regulation 3 of FSMA given that it was carrying on a business and as such the claim failed.

Comment

This decision reaffirms that in first-party property insurance claims, limitation runs from the date of loss and attempts to circumvent this using the ‘hold harmless’ principle or by seeking specific performance will not succeed.

For claimants in first-party property damage disputes, this judgment comes as a useful reminder of the strict application of the Limitation Act and underlines the importance of ensuring that proceedings are issued within 6 years of the date in which the loss occurred.

If you are a policyholder and you’ve suffered a loss which insurers are reluctant to or refusing to pay or if you are underinsured and you would like to discuss your options, then please contact Nicola Maher.