Aspen Insurance UK Ltd v Adana Construction Ltd

In a building-services liability policy, the definition of “Product” must be read in context. The specified means by which an item is produced or leaves the insured’s control do not make every item created by construction work a product. A structure formed on site as part of foundation works may remain workmanship rather than a product. Components supplied and installed may be products, but defective installation is distinct from a defect in the product itself. A foundation exclusion covering loss or damage to “any superstructure” can extend to a temporary crane. Damage to the crane caused by foundation works failing to prevent its collapse is therefore excluded.

Adana constructed a reinforced concrete crane base and installed dowels into existing piles. After a heavier crane was erected, it collapsed, causing personal injury and property damage. Aspen sought a declaration that its policy imposed no liability. His Honour Judge Mackie QC declined to grant it in [2013] EWHC 1568 (Comm). Aspen appealed.

The Court of Appeal considered whether the crane base, its components, or the installation works were Products; how the Public Liability and Product Liability provisions interacted; and whether the foundation clause excluded liability for damage to the crane. The factual cause of the collapse and Adana’s underlying liability remained unresolved.

Christopher Clarke LJ delivered the judgment, with which Vos LJ and Gloster LJ agreed. The appeal was allowed in part.

1. The policy definition of Product was contextual. The specified ways in which an item might be manufactured, constructed, installed or supplied did not mean that every item produced by construction work was necessarily a Product. The item also had to be reasonably regarded as a product in the conventional or natural sense. A structure that came into existence only as part of the land was not ordinarily within that category.
2. The concrete crane base was not a Product. Adana had carried out on-site concreting and foundation works to secure the crane, rather than constructed a moveable product. The fact that the works created something did not determine the issue.
3. The dowels were Products because they were supplied and installed by Adana and became components of the base. However, the alleged defect concerned the installation: the holes were too shallow or narrow, or the bonding material was improperly applied. The dowels themselves had not broken or fractured. Any liability arising from that defect would therefore be attributable to faulty workmanship, not to a failure of the dowels as Products. Product Liability cover did not extend to defective installation, while the Public Liability wording covered faulty workmanship subject to the policy’s other terms.
4. The foundation clause was not confined to permanent buildings. “Any superstructure” could include a temporary crane resting on a crane base. The crane base, installation of the dowels and application of bonding material were foundation works. Damage to the crane arose from those works failing to transfer tensile loads so as to prevent toppling. Any liability established against Adana for damage to the crane itself was therefore excluded.
5. The court expressed grave reservations about deciding coverage before the underlying liability claims had been fully pleaded or determined, but made the declarations sought on the foundation clause.

Observations concerning the Product Liability exception for failure to fulfil an intended function were expressly obiter and based on assumed facts. The court provisionally indicated that failure of a composite arrangement should not automatically be attributed to every component individually.

• Court of Appeal (Civil Division): Allowed the appeal to the extent of declaring that the crane was a superstructure, the crane-base works were foundation works, and liability for damage to the crane was excluded under the foundation clause.
• High Court of Justice, Commercial Court: His Honour Judge Mackie QC declined to make a declaration of non-liability in [2013] EWHC 1568 (Comm).