OAKAPPLE HOMES (GLOSSOP) LTD V DTR (2009) LTD

[2013] EWHC 2394 (TCC), Queen's Bench Division, Technology and Construction Court, Mr Justice Ramsey, 31 July 2013

Insurance (professional indemnity) - Effect of exclusion for liability arising other than in contract

Oakapple converted a former cotton mill into 72 residential apartments. DTR were appointed as architects for the project. Under the contract DTR was required to enter into collateral warranties in favour of purchasers or tenants on Oakapple's request, as if the beneficiaries were original parties. Following the completion of the works the freehold was obtained by ZA and OH became head lessee. The property was destroyed by fire in April 2007. DTR went into liquidation in August 2009. ZA called upon DTR to execute the collateral warranties in favour of lessees. DTR's liquidator sought guidance from the court as to whether the execution of collateral warranties would remove cover under DTR's liability policy. That policy excluded the insurers' liability for any claim arising out of any performance warranty unless liability would have existed in the absence of the performance warranty, although the indemnity did apply to a claim arising from performance under collateral warranty provided that the benefit of such warranty was no greater or no longer lasting than that in the original contract. Ramsey J held that the insurers would face liability if the collateral warranties were entered into. The effect of the collateral warranties was that DTR could not defend claims against it by reason of contributory negligence on the part of Oakapple because that defence was not available as against a pure contract claim. As far as the policy exclusion was concerned, it was worded to match the insurance cover to the liabilities under DTR's contract and referred to the nature of the rights conferred by the warranty rather than the amount of damages.