Construction Insurance and UK Construction Contracts
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CHAPTER 13
Insurance arrangements and parties’ ability to sue and be sued
Introduction
13.1 In the previous and in the subsequent chapters of this book there are numerous references to the effect of insurance arrangements (and contractual arrangements as insurance) upon the ability of parties to sue and be sued. There are numerous cases, many decided in the Court of Appeal and not a few in the House of Lords, upon this topic. The decisions often appear inconsistent and therefore hard to reconcile. 13.2 The claims considered generally arise in circumstances where there has been damage by fire either to new contract works or to existing buildings in which or adjacent to which building works are being carried out. Generally the fire causing damage started through a negligent act or omission. In such circumstances, as explained in , the contractor or subcontractor responsible for the works in the course of which the fire broke out is likely to be held liable at common law even if the fire was caused by the acts or omissions of an independent subcontractor. It is also a well-recognised principle of construction contracts (also discussed in ) that in the absence of clear and unambiguous language a party’s liability for negligence will not be limited, still less totally excluded. These principles, which are all well established, lead to courts striving to fix negligent contractors with the consequence of their carelessness. 13.3 On the other hand, it is often the case under standard form contracts and other ad hoc (one-off) contracts that provision is made for one party alone to be responsible for obtaining insurance - very often the employer has this obligation. It is undesirable commercially for the cost of insurance to be splintered between a number of parties to a construction project - more sensible, it is said, for all risks of such perils as fire to be insured through one insurance policy. In order to make commercial sense, it is undesirable for one insurer acting pursuant to subrogated rights in the name of one party to the project to sue another participant who will doubtless require his liability insurers to step in to defend such a claim. Far better for there to be an insurance fund to be available to pay for damage caused by fire and other perils, and to avoid time-consuming and time-wasting disputes between the different parties to a project. 13.4 As there are a number of decisions that are difficult to reconcile, we consider:- (1) the cases under standard forms of building contract or contracts the terms of which are clearly influenced by the standard forms of building contract;
- (2) briefly, waiver of subrogation and cross-liability clauses;
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(3) a group of cases that have in common discussion of the detailed interrelationship of insurance arrangements and contractual liability;Page 201
- (4) in a little detail the Court of Appeal decision on the subject Tyco Fire & Integrated Solutions (UK) Ltd v Rolls-Royce Motor Cars Ltd;1
- (5) two recent Court of Appeal decisions bearing on the subject; and
- (6) the general principles from the authorities considered.
Cases on standard forms of building contract
13.5 (1) James Archdale & Co Ltd v Comservices Ltd 2 is the first in the series of cases to be considered. In that case the Court of Appeal considered two clauses in the 1952 RIBA standard form of contract. The first clause was clause 14(b):The contractor shall be liable for and shall indemnify the employer against and … shall insure against any liability, loss, claim or proceedings in respect of any injury or damage whatsoever to any property, real or personal, in so far as such injury or damage arises out of or in the course of or by reason of the execution of the works, and provided always that the same is due to any negligence, omission or default of the contractor, his servants or agents or of any subcontractor or to any circumstances within the contractor’s control; and subject also as regards loss or damage by fire to the provisions contained in clause 15 of these conditions.