Where project-wide cover was taken out for a construction contract for extensions to a school but the roofing contractor was obliged to take out its own insurance, it was held that the roofing contractor who caused a fire and a loss of £8.75 million was not entitled to the benefit of the project-wide insurance.

The facts are sadly familiar. Hot work was done on a roof using a blowtorch to stick down roofing membrane. A fire occurred which spread and caused extensive damage to the building. It was an express term of the roofing subcontract that the subcontractor would obtain its own third-party liability insurance cover and it did so for £5 million.

The three project insurers paid out £8.75 million and sought a subrogated recovery of the £5 million from the roofing subcontractor, essentially from its insurers who resisted the claim.

It was argued by the roofing contractor that it was entitled to cover provided by the project insurance and that therefore the project insurers had no right of subrogation against it. The court found that although it is commercially sensible for all the risks in a contract to be covered by a single insurance policy as is commonly done in a Contractors All-Risk insurance policy, where there is a specific provision in the subcontract that the subcontractor must have its own third party liability insurance, this provision overrides the subcontractor’s entitlement to the benefit of the project insurance.

The project insurers recovered the £5 million.

[The case is Haberdashers’ Aske’s Federation Trust Limited V Lakehouse Contracts Limited & Others]