Search

BLOG

TCC Rules That Sub-Contractors Are Not Automatically Covered By Project Insurance

Blog image

Haberdashers' Aske's Federation Trust Ltd and another v Lakehouse Contracts Ltd and another[1]

The issue of whether subcontractors can benefit from project-wide insurance policies has always been uncertain.  Up until now, it has been assumed that, should a policy be in place, a sub-contractor will be covered.  However, the Technology and Construction Court in Haberdashers' Aske's Federation Trust Ltd and another v Lakehouse Contracts Ltd and another has recently confirmed that sub-contractors are expected to take out their own cover, and cannot, therefore, rely on project-wide insurance.  Furthermore, the main contractor (on behalf of the insurers) could recover sums paid out from the project policy from the sub-contractor.


The facts of the case

The first defendant, Lakehouse, was appointed as the main contractor for an extension to be built on a school and had taken out project-wide insurance.  Lakehouse sub-contracted Cambridge Polymer Roofing as sub-contractor to carry out roofing works.  The sub-contract provided that Cambridge Polymer Roofing obtain its own insurance cover for the sum of £5 million.

Following a fire which broke out while Cambridge Polymer Roofing was carrying out works, the claimants, who owned the premises, began proceedings seeking damages against Lakehouse and Cambridge Polymer Roofing.  Lakehouse sought a contribution or an indemnity from Cambridge Polymer Roofing, and Cambridge Polymer Roofing sought a declaration that it could rely on the project insurance.  Lakehouse settled the proceedings by paying the claimants £8.75 million which was paid by the project insurers under the project policy.   

The project insurers sought to bring a subrogated claim against Cambridge Polymer Roofing to recover sums paid in settlement (the project insurers claimed £5 million, being the amount of Cambridge’s insurance cover).  This question was determined by way of preliminary issue, on the assumption that the fire was caused by the subcontractor's negligence.

Cambridge Polymer Roofing argued that, notwithstanding the express term in the sub-contract that it obtain its own insurance, the project insurance had been intended to, and did, include it as an insured party either under the principles of agency and ratification, or because there was a standing offer by the insurers to insure persons subsequently ascertained as members of a defined grouping.  This was namely Lakehouse’s sub-contractors.  Alternatively, it was argued that the insurers had accepted by conduct that Cambridge Polymer Roofing would be included in the project insurance.


The TCC’s decision

Justice Fraser considered the terms of the sub-contract and the project insurance policy, and how a sub-contractor can claim coverage under the project insurance.

The court reasoned a sub-contractor was entitled to coverage via project-wide insurance when the project’s insurers made a standing offer to insure all parties who are identified as part of a defined group.  If the offer was accepted by the sub-contractor before starting work on the project, it would result in an implied term in the contract preventing the sub-contractor being sued by the main contractor for anything covered by the project insurance.

In this case, however, there was an express term in the contract that meant the above term could not be implied.  Essentially, Cambridge Polymer Roofing did not form part of the ‘defined group’ (and therefore no standing offer was made to it).  Even if a standing offer could be established, the express term would contradict the implied term.

Justice Fraser then considered Cambridge Polymer Roofing’s arguments surrounding agency (i.e. that Lakehouse acted as Cambridge’s agent when entering into the project insurance policy).  He doubted that the principles of agency could be applied in matters involving project insurance.

The most important consideration was the intention of the parties, and this was that Cambridge Polymer Roofing would take out its own insurance and not be reliant on the project insurance.

The court also rejected Cambridge Polymer Roofing’s claim that it was permitted to benefit from the project insurance by virtue of the Contracts (Rights of Third Parties) Act 1999.  The sub-contractor tried to rely on a policy endorsement to override a general exclusion of third party rights in the policy terms, but the court held that the endorsement only conferred rights on parties who were insured under the policy (which, considering the court’s findings above, Cambridge Polymer Roofing was not).

In summary

This case provides clarity regarding the circumstances in which a sub-contractor can rely on project-wide insurance.  If a standing offer has not been made, thereby inserting an implied term into the contract, it is likely the sub-contractor will need to organise its own cover.

Fisher Scoggins Waters are experts in construction, manufacturing, and engineering law, based in London.  If you would like more information on construction contract disputes, please phone us on 0207 993 6960.

 


[1] [2018] EWHC 558 (TCC)

Follow our company page on linkedin for future updates and our views on the latest developments

Please leave a comment

Enter the name you would like to appear on the comment.
(required)
Enter the email you would like to use to get updates. You email is not visible and can not be used by other users.
(required)
Enter you comment help.

 
  Post Comment

Book Launch - 27 November 2019

Will you be joining us?

HSE and Environment Agency prosecution: A new climate

27 November 2019 | Bloomsbury, 50 Bedford Square, London, WC1B 3DP

Event Registration

First name
Surname
Email address
Any additional information
Post/Event URL
Post/Event Title
CAPTCHA image
Enter the code shown above in the box below.

Tag Cloud

‘fit for purpose’ obligations 2016 Adjudication adjudication lawyer Adjudication Notice Adjudication process appeal appointing an adjudicator Arbitration Artificial Intelligence Asbestos benefits of off-site construction bonfires book launch breach of contract Brexit Building Defects business interruption Business Interruption Insurance CDM CDM Regulations chambers and partners Charlotte Waters civil proceedings claim payments Claims client COMAH commercial contracts complex construction claims Compliance compulsory sprinklers in warehouses consequential loss construction Construction Construction & Engineering construction contract Construction contract dispute Construction contracts Construction dispute construction dispute lawyer construction dispute resolution construction dispute resolution solicitor construction dispute solicitors Construction Disputes Resolution Construction industry Construction Magazine contracts Contribution claim Corporate Manslaughter Corporate Responsibility costs criminal investigation criminal proceedings cut out fuse Defective Building Work Defective Premises Act developer developers disadvantages of off-site construction Disaster disaster claim Disasters Dispute dispute resolution Disputes DPA Dr Louise Smail Emergency response Emergency Response Solicitors enforcement notices Engineering Engineering dispute Environment Agency environment law Environmental Environmental Agency Environmental damage Environmental Law environmental waste EU EU Procurement Europe Evidence Expert evidence expert witness falls from height Fatal Accidents fee for intervention Fees For Intervention FFI FIDIC Contracts fine Fines Fire Fire Claim fire claims fire damage fire damage lawyers fire sprinkler systems fireworks flood flood claim flood damage food hygiene Fracking fracking claims Fraudulent claims FSW Gross Negligence Manslaughter Guide to Adjudication H&S fine increases; health and safety fines; Health & Safety health & safety breach health & safety sentences health & safety sentencing guidelines health & safety sentencing large corporations health and safety health and safety Health and Safety Executive heave Higher Fines Honey Rose v R How to appoint an adjudicator HSE Insolvency insolvent insurance Insurance Act 2015 insurance bill Insurance Broker insurance claim insurance cover Insurance Disclosure Insurance Disclosure insurance dispute insurance dispute solicitors Insurance Warranties ISO 45001 join us joint venture Judicial Review latest news Law Lawyer legal 500 legal advice privilege Legal Expense Insurance legal professional privilege legal retainers Liability Liquidated Damages Litigation litigation privilege local bodies magistrates’ courts Major Property Damage Manufacturing Martinisation material breach Mediation Michael Appleby Micheal appleby modern methods of construction (MMC) modular construction Mr. Gutaj Notice of adjudication panel firms party wall Performance Bond planning powers of an adjudicator pre-fabrication procurement procurement injunction procurement model Property Damage property danage Public Contract Public Contracts Public Contracts Regulations public procurement public procurement challenges public procurement relationship public sector Publicity Order PUWER recruitment regulation 11 Relief Resolution riot Riot Compensation Act 2016 Risk Risk Assessment safety in the workplace Sanctions Self-build sentence sentencing sentencing guidelines Serious Fraud Office SME Sneller Sony specialist risk and safety consultant Statute Barred Sub-Contractors subrogation subsidance subsidence TCC TCC Guidance team Technology and Construction Court The Adjudicator’s Decision and Costs The Enterprise Act The Lord Young Reforms The Powers Of An Adjudicator The Public Contracts Regulations 2015 The referral notice and response Training tree root UK Underwriters Warehouse insurance Warranties waste water damage WEEE What is Adjudication? what should an adjudication refal notice contain work equipment

Search The Site

Accreditations

 

The Legal 500 - The Clients Guide to Law Firms


Contact Us Now For Advice And Guidance

Enter your name
Enter your surname
Enter your Email
Ask us a Question?