Joint names and construction insurance

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.

Tyco: the facts

By a contract entered into in November 2002, RR engaged Tyco to design, install, commission and complete a fire protection system – including a sprinkler system – at RR’s new assembly plant in Sussex. Practical completion of Tyco’s works occurred on 26 November 2003 and practical completion of the whole assembly plant occurred on 31 May 2004. While the work was ongoing, in 30 July 2003 there was an escape of water from one of the main supply pipes on the sprinkler system installed by Tyco in one of the buildings (B50) within the assembly plant. Tyco had under its contract with RR agreed to indemnify RR for damage to the works, and duly did so as well as repairing the sprinkler system. The outstanding dispute between the parties was the damage caused to other parts of the plant, and other losses, by the escape of water. That matter was referred to adjudication, and Tyco was ordered to pay £393,562.14 as damages plus interest of £39,765.95 and costs of £100. Tyco disputed the award and in the present proceedings applied for a declaration that it was not liable (even on the assumption that there had been negligence on its part).