Public liability

In Tesco Stores Ltd v Constable [2007] EWHC 2088 (Comm), discussed in the March 2008 issue of Insurance Law Monthly, Mr Justice Field confirmed that a public liability policy is targeted to provide an indemnity to the assured against claims which may be made against him in tort, or alternatively against claims which may be made against him for breach of contractual duty which could also have been brought in tort. The cover is not designed to indemnify the assured against liabilities which he has voluntarily undertaken in a private contact with a third party which have no tortious counterpart. The Court of Appeal, [2008] EWCA Civ 362, has upheld the judgment on Field J in more or less the same terms as it was handed down.

Tesco: the facts

In 2003 Tesco commenced a project to build a supermarket on a piece of land, which was surrounded by land owned by Network Rail and on which there was a railway line. The line itself was owned by Network Rail but trains were operated on it by Chiltern under a contractual licence. The supermarket was to be constructed over a railway cutting, and the cutting was to be enclosed in a tunnel constructed of concrete sections. Tesco entered into a Deed of Covenant with Chiltern under clause 4.2 of which Chiltern was granted a contractual indemnity up to £155m: this provided that Tesco was to pay to Chiltern ‘on demand such sums as shall from time to time fairly compensate them for all and any costs, losses or expenses arising out of or resulting (directly or indirectly) from … the carrying out of the Works … on its existing and/or future railway passenger business.’ The Office of the Rail Regulator required Tesco to take out public liability insurance cover of £155m ‘in respect of legal liability which may be incurred by [the insured] in respect of death or bodily injury to any person and loss or damage to property arising from activities authorised by each licence holder’ (ie, Chiltern).