Tesco Stores Ltd. v Constable & Ors

A public liability policy is construed as a whole and in its commercial context. Wording covering liability for damages relating to bodily injury, property damage, obstruction, loss of amenities, nuisance or like causes ordinarily covers tortious harm, and contractual liability co-extensive with that tortious liability. It does not ordinarily cover pure economic loss recoverable only in contract. A contractual liability extension may transfer covered tortious liabilities between project participants, but does not convert the policy into cover for purely contractual economic loss. The words “liable at law” and “all sums” cannot be isolated from the surrounding insuring clause.

Tesco sought an indemnity from excess insurers for sums payable under a deed of covenant with Chiltern Railway Company following the collapse of a tunnel constructed for a supermarket project. Chiltern’s railway service was interrupted for 51 days and it claimed compensation, including loss of passenger revenue, under the deed.

The parties agreed that Chiltern had no affected property interest and that Tesco’s liability arose solely under the deed. Three preliminary issues concerned whether the losses were damages for property loss, obstruction, loss of amenities, nuisance or a like cause, whether the insurers were liable to indemnify Tesco, and whether the words “in respect of” imposed a further limitation.

1. Issues 1 and 2. The questions were answered no. The relevant wording had to be construed by its ordinary and natural meaning in its contractual and commercial setting, adopting the approach stated in Tioxide Europe Ltd v CGU International Insurance plc [2005] Lloyd’s Rep IR 114 and ultimately reflected in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896.
2. The policy was a public liability policy. Its references to bodily injury, property damage, nuisance and trespass, together with obstruction, loss of amenities and any like cause, described harm protected by the law of tort. “Obstruction” referred to actionable obstruction of a highway or private right of way. “Loss of amenities” referred to impairment of property-related amenities and rights. “Any like cause” had the same essential characteristic.
3. The words “liable at law” and “all sums” therefore covered liability in tort and contractual liability co-extensive with such tortious liability. They did not cover liability for pure economic loss recoverable only in contract. Chiltern had suffered no tort-compensable harm on the agreed facts, so Tesco’s liability under the deed was outside the cover.
4. The contractual liability extension did not materially enlarge the meaning of the insuring clause. It covered contractual liability for a tort falling within the clause where that tort had been committed by another project participant. Together with the separate-insured and subrogation provisions, it facilitated the transfer of covered tortious liabilities within a construction project.
5. Issue 3 was not answered. The agreed facts did not presently raise a practical question about whether “in respect of” limited damages recoverable in tort. The parties had liberty to apply if that issue later required determination.