FM Conway Limited v The Rugby Football Union & Ors.

Being a co-insured under a composite policy does not itself provide the same cover as another insured or prevent claims between co-insured parties. The court must determine authority, intention and the scope of cover. The underlying contract is normally the principal source of that evidence, although the wider dealings and subsequent conduct may also matter. A party’s identified or identifiable status does not remove the need to establish intention. A waiver of subrogation operates only for losses insured for that party’s benefit; it cannot create cover for uninsured defective-work losses. The contractual scheme determines whether insurance is the sole remedy or coexists with contractual liability.

The Rugby Football Union engaged FM Conway Limited to install ductwork at Twickenham Stadium. The RFU alleged that defective design and installation caused damage to high-voltage cables. Royal & Sun Alliance Insurance PLC indemnified the RFU for the cable replacement costs and brought subrogated proceedings against Conway, alongside claims involving Clark Smith Partnership Limited.

Conway accepted that it was a co-insured under the project policy. It argued that the policy covered its liability for its own defective work, that the RFU could not recover the insured loss from it, and that RSA could not exercise subrogation rights. Eyre J rejected that defence in [2022] EWHC 956 (TCC). The appeal concerned the correct approach to authority, intention and scope of cover, the relevance of the Letter of Intent and subsequent building contract, Conway’s identified or undisclosed-principal arguments, and the waiver of subrogation clause.

The Court of Appeal dismissed the appeal. Coulson LJ gave the judgment, with Baker LJ and Nicola Davies LJ agreeing. The judge’s decision on the first preliminary issue was upheld, and it was unnecessary to determine the second issue concerning contribution.

1. Nature of the insurance. The policy was composite. The fact that Conway and the RFU were insured under the same policy did not mean that they were insured against the same losses or could not claim against each other. The distinction between joint and composite insurance, and the significance of respective rights and interests, supported that conclusion.
2. Authority, intention and scope. Whether insurance procured by one party covered another required consideration of authority, intention and the policy terms. The underlying contract was ordinarily the best starting point, although it was not the only permissible evidence. The approach was consistent with [1993] 2 Lloyd’s Rep 582 and the contractual-scheme analysis in [2017] UKSC 35. Conway’s status as an identified or identifiable insured did not dispense with the requirement to establish intention.
3. Contractual documents and evidence. The Letter of Intent already created a binding contractual framework. It incorporated the identified JCT terms, including Option C, and excluded reliance on prior discussions through its entire-agreement clause. The later building contract was retrospective in effect on its proper construction and could be considered in assessing authority and intention. The earlier understanding between Mr Higgs and Mr Morris was not reflected in the final contractual regime and therefore did not establish wider cover.
4. Result and waiver. The RFU intended to provide Option C insurance, not a common fund that was the sole recourse for loss caused by Conway’s own default. Conway was insured, but not to the same extent as the RFU for the cable damage. The waiver of subrogation protected Conway only against claims concerning losses insured for its benefit. It could not indirectly create insurance for losses outside Conway’s cover. The RFU and RSA were therefore entitled to pursue the relevant claim.

• Court of Appeal (Civil Division) — The appeal from [2022] EWHC 956 (TCC) was dismissed. The court upheld the conclusion that Conway could not rely on co-insurance or the waiver of subrogation to defeat the RFU’s and RSA’s claim.
• High Court, Technology and Construction Court — Eyre J determined the first preliminary issue against Conway, holding that the policy did not provide Conway with cover for the relevant losses on the same basis as the RFU. The second preliminary issue was not decided.