Lloyd's Maritime and Commercial Law Quarterly
Joint names insurance and contracts to insure: untangling the threads
Daniel Ward *
This article discusses the linked doctrines of (i) co-insurance as a defence to subrogated claims between co-insureds, and (ii) exclusion of liability for causing damage to property derived from provisions requiring one party to insure on behalf of another. It comments on the Court of Appeal judgment in Tyco Fire & Integrated Solutions Ltd v. Rolls-Royce Motor Cars Ltd and criticizes the suggestion in that decision that a subrogated claim between co-insured parties is permissible so long as there is no exclusion of the defendant’s liability in an underlying contract between the two.
I. INTRODUCTION
Contracts that concern property in respect of which both parties have responsibilities—in particular construction contracts and leases—will often provide that one party, for the benefit of both, is required to take out and maintain insurance against the risk of damage to the property. Provisions of this kind play an important role in shaping the distribution of risk under the contract. At the same time, contractual requirements to maintain insurance cover are of significance to insurance lawyers.
In the context of construction projects, insurance of the works is frequently required to be in the “joint names” of the employer and the contractor.1 This is important, because it has been held that, where two or more persons are insured in respect of the same damage, the insurer is barred from bringing a subrogated action against one in the name of the other.2 There is, in effect, a waiver of the insurer’s right to pursue one party in the name of the other to recover its losses. Thus, where joint names insurance of the works is maintained on behalf of both the employer and the contractor, the cost of repairing damage will largely fall on the insurer, who will not then be able (so long as both parties are insured in respect of the damage) to pass these losses on to the defaulting contractor.
However, a contractual requirement that one party maintain joint names insurance may have another, related, consequence: even if the person obliged to take out the insurance fails to do so, the very existence of a provision requiring insurance to be taken out may,
* Barrister, Fishburns, London. The author would like to thank Paul Reed of Hardwicke Building for his kind encouragement and insightful comments on the ideas expressed in this article as they were being developed. Any errors are, of course, the author’s own.
1. As to the major standard forms, see: JCT Standard Building Contract With Quantities 2005 Edition (“JCT 2005”), cll 6.7–6.10 and Sch 3 (and the same-numbered provisions of the 2005 Without Quantities and With Approximate Quantities editions); JCT Minor Works Building Contract 2005 Edition, cll 5.4–5.5. See also the ICE Conditions of Contract, 7th edn, cl 21(1).
2. See infra, Part II.
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