Technip Saudi Arabia Limited v The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company

A liability insurer may be liable for sums paid under a settlement without the insurer’s consent where the payment is properly characterised as compensatory damages. The insured must still prove that it was legally liable to the third party and that the liability was at least the amount claimed.

An existing-property exclusion may be construed by reference to the identity and nature of the damaged property, rather than the identity of the insured making the claim. Where the policy excludes property owned by any Principal Assured unless specifically scheduled, damage to unscheduled property remains excluded even if caused by another insured.

Technip sought an indemnity from Medgulf under an offshore construction liability policy after settling claims by KJO arising from an allision between a vessel engaged on the project and an existing wellhead platform.

The issues included whether Technip had contractual liability for the damage, whether the absence of Medgulf’s consent to the settlement defeated the claim, and whether the Existing Property Endorsement or other exclusions applied. The court also considered quantum contingently, in case its liability conclusions were overturned.

1. Contractual liability. Applying ordinary principles of contractual construction, clauses 5.2.3 and 12.6 made Technip responsible for the damage. The Platform was near the Work Site: a distance of about 1 km was sufficient in the circumstances. Performance of the Work included the Vessel’s passage to anchorage before resuming work, since the engagement and use of an anchor-handling vessel were reasonably necessary for proper execution of the Work.
2. Maridive was a Subcontractor under clause 12.6. The definition was not confined to parties performing the core physical works. The clause was drafted broadly and covered a party engaged to provide an essential service facilitating performance of the Work. The absence of compliance with all subcontracting procedures did not prevent liability. Clause 12.6 was also capable of creating liability independently for the negligence of a Subcontractor.
3. Consent to settlement. The settlement payment could fall within “compensatory damages” and therefore within “Damages” and “Ultimate Net Loss”, despite the absence of underwriters’ consent. The categories in the definition were not watertight compartments. The payment compensated KJO for damage for which Technip was contractually liable. The court also indicated that an insurer which had denied cover and told the insured to act as a prudent uninsured might be unable to rely on a consent requirement, by waiver or estoppel.
4. Existing Property Endorsement. Limb 1 applied to property owned by any Principal Assured. The composite nature of the policy did not alter that construction. The scheduled buy-back was commercially intelligible only if unscheduled property owned by a Principal Assured was excluded, regardless of which insured incurred liability or made the claim. The Platform was not scheduled. Technip’s claim was therefore excluded.
5. Limb 3 did not apply: clauses 5.2.3 and 12.6 defined fault-based contractual liabilities and were not indemnification, hold-harmless or similar provisions. The Watercraft exclusion had also been deleted by endorsement, and its condition was satisfied.
6. The claim was dismissed. If the exclusion had not applied, the court would have awarded US$10,377,059.