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Lloyd's Law Reporter


[2017] EWCA Civ 25, Court of Appeal, Lord Justice Lewison, Mr Justice Arnold and Sir Stephen Tomlinson, 25 January 2017

Insurance (professional indemnity) - Date on which liability of assured established and ascertained - Effect of interim order of damages

Claims were made against the assured by a third party for defective performance of a contract to provide a sewage system. On 10 December 2010 the assured agreed to place US$13,460,531 into an escrow account on the terms of an Escrow Agreement. The required sum was paid on 15 December 2010. The sum was to be used for remedial works, and was to be drawn down as and when the work was carried out by external contractors. The preliminary issue for the court was whether the assured's liability was established and quantified at the date of the Escrow Agreement or on the various dates on which drawdowns too place. Eder J opted for the latter date. There were various contractual conditions applicable to the Escrow Account which meant that the money might never be paid to the third party. In particular: the obligation to make payment was to become void if a contract employing a replacement contractor was not signed by 2 May 2011; any sum in excess of what was required was to be repaid to BVC; and any money in the account on 31 July 2013 was to revert to Teal. Again, the amount of the assured's liability was not ascertained until the third party submitted certificates which proved the cost of work which had been done. So it could not be said that there was any established and quantified liability until payment was called for.

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