Tyco Fire & Integrated Solutions (UK) Ltd v Rolls-Royce Motor Cars Ltd

Joint-names insurance against specified perils may establish a special contractual regime which displaces ordinary liability for negligence or breach of contract in relation to loss caused by those perils. The question is one of construction of the contract as a whole. The court must identify whether the contingency was expressly provided for and whether the contractual arrangement precludes a claim for compensation. Clear insurance wording is not confined to non-negligent events merely because some listed perils resemble force majeure events. Where the contract requires the contractor to make good damage and limits payment to insurance proceeds, and contains no saving preserving ordinary liabilities, the parties may be taken to have agreed to look to the joint insurance for the relevant loss.

The claimant installed a fire protection system at the defendant’s assembly plant. A sprinkler pipe burst before practical completion because of the claimant’s negligence, causing damage outside the claimant’s works. The defendant had failed to maintain the joint-names insurance required by clause 13.5, but the court treated the liability question as if that insurance had been in force, following GD Construction (St. Albans) Ltd v Scottish & Newcastle plc [2003] EWCA Civ 16.

The claimant sought a declaration that clause 13.5 relieved it from liability under the contractual indemnities and repayment of sums paid following an adjudication. The central issues were whether the claimant was covered by the required insurance, whether the escape of water was a specified peril, and whether clause 13.5 displaced clause 2.3 and the ordinary law of negligence.

1. The claimant was within the persons covered by the insurance of existing structures. The words “others, including, but not limited to, contractors” were wide enough to include it.

2. The escape of water fell within the specified perils of flood, or bursting or overflowing of water tanks, apparatus or pipes. Those words were not limited to events outside the parties’ control. They were capable of covering damage caused by the negligence of a contractor.

3. Clause 13.5 created a special contractual regime. It required the contractor to make good damage to the works caused by a specified peril, irrespective of fault, while limiting payment to the amount recoverable under the joint policy. The absence of a saving clause, unlike the provisions governing the contractor’s own insurance, supported the conclusion that the ordinary indemnities were subject to that regime.

4. Applying the approach in Cooperative Retail Services Ltd v Taylor Young Partnership [2002] 1 WLR 1419, the parties had made express provision for the contingency and intended the joint insurance to be the fund to which they would look. The issue was allocation of risk under the contract, rather than exclusion of liability for negligence.

5. The claimant was entitled to a declaration that the defendant could not recover compensation for loss arising from the escape of water. The claimant was also entitled to repayment of the sums paid under the adjudicator’s decision, with interest. The parties were invited to agree the precise principal, interest and costs.

The judgment describes an adjudicator’s decision dated 7 April 2005 requiring payment to the defendant. This first-instance action determined the contractual principle and ordered repayment in principle.