THE CULTURAL FOUNDATION AND ANOTHER V BEAZLEY FURLONGE LTD AND ANOTHER

[2018] EWHC 1083 (Comm), Queen's Bench Division, Commercial Court, Andrew Henshaw QC, 8 May 2018

Insurance (liability) - Claims made and notified cover - Notification of circumstance - Knowledge of existence of circumstance - Scope of notification - Year into which notification fell - Defence costs - Third Parties (Rights Against Insurers) Act 1930

In 2005 RMJM entered into a Consultancy Services Agreement with ASD under which RMJM agreed to carry out the design and construction administration of a new school campus in Dubai. Sector A of the project included an indoor athletics facility, Field House. Sector B of the project included a theatre and music rooms. In October 2006 and November 2007 RMJM entered into two related contracts with ADNEC for the provision of consultancy services for the construction of Phases 1 and 2 of the Abu Dhabi National Exhibition Centre. Beazley insured RMJM under primary layer policies in the years 2008/2009 and 2009/2010, for the sum of US$10 million on a claims made basis, insuring RMJM's liability for claims "for compensation and or damages first made against [RMJM] and notified to Underwriters during the Period of this Policy which [RMJM] may become legally liable to pay and which arises out of the exercise and conduct of [RMJM's] Professional Business by the Assured". The claims condition required RMJM to notify any circumstance "as soon as practicable". An aggregation clause provided that where than one claim arose from the same original cause all such claims were be deemed to be one claim and only one limit of indemnity was to be payable in respect of the aggregate of all such claims. Beazley was also to indemnify RMJM for defence costs where incurred with consent, payable in addition to the limit of indemnity but if the liability exceeded the sum insured then defence costs were to be reduced pro rata. It was a condition precedent that if during the policy period RMJM became aware of any circumstance "which suggests that a claim is likely to be made", notice was to be given as soon as practicable within the policy period, and any circumstance notified was to be treated as a claim. The policies also stated that notice was properly made "if received in writing by Integra Technical Services Ltd and Beazley Group". Integra was a claims handling and loss adjusting services company engaged by RMJM, and the policy further provided that Integra was to provide a bordereau of all claims notifications. There was excess layer cover in existence for both years from four Excess Insurers, covering US$35 million in excess of the primary layer of US$10 million. The terms were as for the primary layer. In late 2008 and early 2009 it became clear that RMJM was failing adequately to coordinate the work and designs of the different disciplines on site. On 31 March 2009 RMJM prepared Notification 923, identifying the coordination problem as a circumstance. In August 2009 concerns were raised about the structural stability and load-bearing properties of the columns for Field House. Work was stopped in Sector A on the basis that columns supporting the large post-tension beams in the Field House in Sector A appeared too thin and in need of reinforcement. On 10 September 2009 RMJM issued Notification 953 in response to a request to RMJM to prepare revised calculations as a matter of extreme urgency. There were also problems in relation to Sector B, relating to acoustic designs for the music rooms and steelwork fabrication. On 15 September 2011 RMJM received a letter before action raising, in 10 bullet points, a number of alleged breaches. The letter was forwarded by Integra on 21 December 2011, referring to Notification 923. Subsequent emails between RMJM and Beazley referred to Notification 923. Arbitrations were commenced. ASD obtained an award dated 31 May 2016 for US$8.6 million plus post-award interest, and ADNEC obtained an award dated 27 July 2016 for US$8.15 million plus post-award interest. Beazley paid the defence costs. RMJM became insolvent and ASD and ADNEC sought to recover the sums awarded to them in the arbitrations from the insurers under the Third Parties (Rights Against Insurers) Act 1930.