Ruling reveals contractor's need to analyse wording

John F Hunt Demolition v ASME Engineering (Queen's Bench Division - 27 June 2007)

John F Hunt Demolition was employed as a sub-contractor in a project where the main contractor was employed under a JCT With Contractor's Design (1998 edition) contract, which required the employer to take out joint names insurance policy in respect of existing structures - including the facades of the building.

Hunt was to be recognised as an insured under that policy. ASME Engineering was Hunt's sub-contractor.

As a result of ASME's negligence - although this was admitted only for the purpose of this hearing - loss was suffered to the facades of the building as a result of fire.

Hunt had settled the main contractor's claim, and was now seeking to recover that settlement from ASME.

The question to be decided by the court was whether Hunt had ever been liable to the employer in tort, given that the main contractor was not liable to the employer in contract (due to the insurance arrangements). Therefore, Hunt could never have been liable in contract to the main contractor.

After a very detailed analysis of both the contractual arrangements and the relevant authorities, the judge decided that Hunt had never had such a tortious liability and therefore could not now recover from ASME for the damage to the facades.

A secondary issue was the question of whether a settlement for more than the actual loss is automatically unreasonable and, therefore, irrecoverable.

The judge found that as a matter of principle it was not but that whether it was reasonable was a matter of fact that he could not decide without hearing the factual evidence.

COMMENT

Project policies or contractors' all-risks policies are intended to avoid disputes between employers and contractors during the course of building works but parties need to recognise that the effect of such an arrangement is to transfer the risk of relevant loss to the insurers away from the responsible party. A careful analysis of the arrangements is therefore needed before any settlements are reached. - Peter Fitzpatrick, BLM London.

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