TYCO FIRE & INTEGRATED SOLUTIONS (UK) LTD V ROLLS-ROYCE MOTOR CARS LTD

Court of Appeal, Sir Anthony Clarke MR, Lord Justice Rix and Lord Justice Keene, 2 April 2008

Construction – Contract requiring contractor to indemnify employer against risk of loss to works and existing structures – Joint names insurance clause stating that employer would take out joint names insurance against specified risks – Whether insurance provision excluded liability of contractor for loss caused by his negligence

The parties entered into a construction contract under which the contractor was required to indemnify the employer against any loss suffered by the employer following breach of duty by the contractor. The contract also stated that the employer was to maintain joint names insurance in respect of existing structures against specified perils (including bursting of pipes). As a result of alleged negligence by the contractor, a pipe burst, causing damage to the works and also to existing structures. The contractor argued that the joint names insurance clause operated to exempt him from liability for insured damage so that the employer was required to look only to the insurers for indemnity. In fact the employer had not taken out any policy, but that did not affect the question of whether the contractor was exempt from liability. The Court of Appeal held that the joint names insurance clause was not intended to be a liability cover for the protection of the contractor and simply provided a statement that the existing structures were covered by property insurance so that in the event of a major peril occurring the contractor would be protected against losses. Rix LJ went on to suggest that, had there been a joint names policy which had covered both the employer and the contractor, the immunity of the contractor from subrogation proceeding would have depended upon the terms of the construction contract and not on any implied term in the policy, so that if the employer was entitled to bring an action against the contractor then the insurers would have a subrogation action even against their own co-assured.