Mabey and Johnson Ltd. v Ecclesiastical Insurance Office Plc & Ors

For the purpose of an insurance policy providing cover on a single-claim basis, the number of claims is determined by the underlying facts and the reality of the position. The third party’s formulation of its demand is relevant but not decisive. A separate cause of action does not necessarily create a separate claim.

Relevant characteristics include the number of claimants, the number and relationship of the contracts, the nature of the claims and their timing. Where negligent design work is undertaken under two separate contracts, and each contractual design obligation is independently breached, the resulting liabilities may constitute two claims even where the designs contain common errors.

The claimant engineering company sought indemnity under a professional indemnity policy for expenditure incurred in reviewing and remedying actual or potential defects in bridges supplied under the Ghana Priority Bridge Programme.

The policy limited indemnity to £2 million for a single claim. The insurer contended that the Ghana I and Ghana II bridge work formed one claim because it arose from a single programme, involved linked construction arrangements and contained common design errors. The claimant contended that the bridge designs were undertaken under two separate design and supply contracts. The central issue was whether the Ghana work constituted one claim or two for the purposes of the policy.

1. Two claims. The court answered the question ordered for trial by Steel J in the affirmative: there were two claims for the purposes of the policy.
2. The policy used the ordinary meaning of “claim”. The court had to examine the underlying facts and assess the reality of the position. The way in which a third party formulated its claim was a useful starting point, but could not determine the insurer’s liability. A claim was not necessarily equivalent to legal proceedings or to a cause of action.
3. The relevant characteristics included the number of claimants, the number of contracts and their relationship, the nature of the claims and the timing of the claims. The court rejected an analysis based principally on the number or nature of causes of action as diverting from the proper inquiry.
4. There were two separate and distinct contracts for the design, manufacture and supply of the Ghana bridges. The design contracts were not subsumed into the related construction contract. The existence of a rolling programme, or the fact that one construction contract covered both phases, did not alter the position.
5. The design work for the two phases was not identical. Mabey owed a separate contractual duty to design each set of bridges carefully and properly. Common errors did not convert the separate breaches into one claim. The engineers were personally responsible for accurate calculations and could not rely, without checking, on defective work undertaken under another contract.
6. The negligence occurred in relation to the Ghana I designs in 1993–94 and the Ghana II designs in 1995. The claim under the policy extension therefore comprised two claims.