A Third Party Liability Policy relating to a tower block residential building insured the principal contractor as well as “contractors and subcontractors”, and others all for their respective rights, interests and liabilities. The court held that the insurance covered the structural engineers according to the plain meaning of the word “subcontractor”. The plain meaning refers to a party who has been contracted to perform a contractual obligation of another party under a contract that it has made with a third party.

The structural engineers were subcontracted to the main contractor to carry out engineering design work that the principal contractor was required to undertake under the contract with the developer. The policy referred to the principal contractor’s business as including the business of being engineers. In regard to the context, the quotation slip was referred to. The slip included insurance for engineers; the insured operations were all the contracts and works relating to the construction. Although the definition of “Insured” included separately “subcontractors engaged by” the named insured and separately referred to engineers “but only in relation to their manual on-site activities” the specific reference to engineers did not preclude the structural engineers from being classified as subcontractors insured under the policy. The words “and/or” at the end of every listed item in the definition of “Insured” meant that an insured may fall within one or more of the listed items.

The policy wording was market wording and there was no suggestion that in these specific circumstances engineers were excluded as subcontractors.  It would be inconsistent with the overall structure of the policy to confine the term “subcontractor” to those engaged in physical construction work. Plainly, the policy sought to extend its scope to those insured beyond those who were named insured. It was in the evident interests of the main contractor to ensure that there was coverage for all entities engaged in the works and therefore less room for disputes about where liability ultimately lay for a loss. Having regard to the evident commercial purpose of the policy there was no reason to confine subcontractors to those undertaking work on-site. Under the policy the structural engineers were “subcontractors engaged by” the main contractor.

It was held that the structural engineers were insured under the policy. South African law is similar.

[WSP Structures v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2023] FCA 1157]