Category: Insurance case law · Reviewed by Taylor Watts, Broker · New Business · Last reviewed June 2026
TCC decision holding a design-and-build contractor liable for breaches of contract arising from defective external wall systems and combustible insulation on residential tower blocks, and a leading case on cladding remediation claims.
Martlet Homes Ltd, a registered provider of social housing, owned a group of five high-rise residential tower blocks in Gosport, Hampshire. Between 2005 and 2008 Martlet’s predecessor had engaged Mulalley & Co Ltd, a contractor, to carry out a refurbishment of the blocks that included the design and installation of an external wall insulation system. The system, known commercially as “StoTherm Classic”, comprised expanded polystyrene insulation boards mechanically and adhesively fixed to the existing concrete substrate, finished with a thin render coat.
Following the Grenfell Tower fire in June 2017, Martlet commissioned investigations into the safety of the external wall systems on the blocks. Those investigations revealed both alleged installation defects (poor adhesion of insulation boards, inadequate fire barriers, defective detailing around openings) and what Martlet contended was an underlying specification defect, namely the use of combustible expanded polystyrene insulation that did not meet the requirements of the relevant Building Regulations functional requirement B4(1) and supporting guidance in Approved Document B.
Martlet decided to replace the entire external wall insulation system on all five blocks with a non-combustible alternative, and to install temporary “waking watch” patrols in the interim. It brought a claim against Mulalley for the substantial costs incurred, alleging breach of the design and build contract on both installation and specification grounds. Mulalley denied liability and disputed both breach and the reasonableness of the remediation strategy chosen, in particular whether full system replacement was a necessary response to the defects identified.
The principal issues were whether Mulalley had breached its contractual obligations in respect of (a) the installation of the StoTherm Classic system and (b) the specification of expanded polystyrene insulation in the external wall build-up; whether the chosen remediation — full replacement of the external wall insulation system, rather than localised repairs — was a reasonable response causally referable to the breaches; and whether Martlet was entitled to recover the costs of the temporary “waking watch” patrols pending completion of the works.
A further issue was the operation of contractual limitation provisions, given that the works had been completed some years before proceedings, and the proper measure of damages where the defects were principally fire safety defects in a post-Grenfell regulatory and political context.
Mr Justice Davies (sitting as a judge of the Technology and Construction Court) found Mulalley liable. The judge held that Mulalley had breached the contract both in respect of the installation defects, which were substantial and pervasive across the five blocks, and in respect of the specification of the EPS insulation, which the judge found did not comply with the Building Regulations functional requirements applicable at the time of the works and was accordingly a breach of Mulalley’s design responsibilities under the contract.
On causation and remediation, the judge accepted that the breaches had created a fire safety risk such that the reasonable response of a responsible landlord was the full replacement of the external wall insulation system with a non-combustible alternative, rather than localised repairs. The court was prepared to consider the post-Grenfell regulatory and reputational context when assessing reasonableness, recognising that the practical and legal landscape for high-rise residential cladding had moved significantly between the original works and the litigation.
The court awarded Martlet the recoverable costs of the remediation works, including the costs of the temporary waking watch arrangements pending completion. The judgment is detailed and contains extensive consideration of expert evidence on combustibility classification, fire spread risk and Building Regulations compliance, and it has been widely treated as the leading first-instance decision on cladding remediation claims under the standard JCT-style design and build contractual framework.
A design and build contractor that has installed an external wall insulation system on a high-rise residential building, including specifying combustible insulation that does not meet the relevant Building Regulations functional requirements, is in breach of its contractual design and workmanship obligations. Where breach is established and creates a fire safety risk, the cost of replacing the system with a compliant non-combustible alternative is recoverable as damages, including reasonable interim measures such as waking watch arrangements, provided that the remediation strategy is itself a reasonable response to the breach.
Martlet Homes v Mulalley is, with URS v BDW Trading, central to the post-Grenfell construction PI and contractor liability landscape. For contractor PI and contractor liability insurers, the case confirms the substantial exposure faced by design and build contractors for combustibility and specification issues on residential high-rises, including liability for full system replacement and interim safety measures. It also confirms that the courts will accept full-system remediation costs as causally referable where the underlying breach created a fire safety risk, even when more limited repairs might have been theoretically possible.
For underwriters, the case has reinforced the trend toward sub-limits or exclusions for cladding and fire safety claims, careful underwriting of historical high-rise residential portfolios, and scrutiny of design responsibility arrangements between contractor and consultant. The judgment is also important for aggregation analysis, given that the breaches concerned multiple blocks under a single contract and produced loss in successive remediation phases.
For brokers, the case is a touchstone in placing contractor PI and design and build liability cover. It supports advice that clients with historical high-rise residential cladding exposure should consider standalone fire safety cover, additional D&O capacity for senior management facing claims and regulatory investigation, and careful run-off planning on disposal or restructuring of relevant entities. Combined with the URS judgment and the Building Safety Act 2022, Martlet defines the contemporary construction PI risk environment.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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