Insurance Law Monthly

In Tyco Fire & Integrated Solutions (UK) Ltd v Rolls-Royce Motor Cars Ltd [2008] EWCA Civ 286 the Court of Appeal has overturned the first instance decision of His Honour Judge Gilliland QC, [2007] EWHC 137 TCC on the interpretation of risk allocation provisions in a construction contract. Such contracts typically require the employer and contractor to take out some form of joint names insurance, and also contain various provisions allocating the risk of loss between the parties. The question which arose in Tyco, and which has arisen in a series of other cases, is whether the insuring provisions are paramount and exclude the liability of the contractor for negligence by requiring the employer to look to the insurers. Tyco makes it clear that there is no necessary connection between indemnity and insurance provisions, and that if the risk is allocated to the contractor then the joint names insurance provisions do not necessarily provide relief for him.

The relationship between assured, placing broker and producing broker has yet to be fully explored by the English courts. In Dunlop Heywards (DHL) Ltd v Erinaceous Insurance Services Ltd [2008] EWHC 520 (Comm) cover obtained by the placing broker was arguably not what was requested, but the problems were not spotted by the producing broker. Mr Justice Field analysed the relationships between the placing and producing brokers, and between the placing broker and the assured, although the case involved only a striking out application so no final decision was required. There is also interesting discussion of the London Market method of making contracts, and in particular the effect of the assured accepting a quotation prior to the scratching of a slip.

A policy deductible in a liability policy may apply to individual claims or it may apply to an aggregation of claims. A deductible of the former type is likely to operate as a means of excluding all small individual claims, whereas a deductible of the latter type allows recovery for small claims when they reach a given level. In Standard Life Assurance Ltd v Oak Dedicated Ltd [2008] EWHC 222 (Comm) there was a dispute as to whether the deductible in a liability policy, taken out by a life office guilty of endowment policy mis-selling, applied to each individual claim (in which case there was no cover whatsoever) or whether it applied to an aggregate of individual claims arising from a common source (in which case there was cover). A further question was whether brokers had been negligent in procuring wording which either did not meet the assured’s requirements or which was at best opaque.

Section 51 of the Supreme Court Act 1981 is something of a nightmare provision for liability insurers. It seems harmless enough on its face, stating simply that the court may order any person to pay the costs of proceedings. Once it became established, however, that the section could be used to order a non-party to pay costs where the proceedings were funded or otherwise for the benefit of a non-party, liability insurers were immediately put at risk of facing costs orders following their unsuccessful defence of their assured in circumstances where the assured had no real interest in the outcome of the proceedings. The practical effect of such an order is that where policy limits are exhausted in meeting any judgment against the assured, the insurers can be called on to make additional payments to meet the claimant’s costs. The most recent case in the line of authorities is Palmer v Palmer [2008] EWCA Civ 46.