The Rugby Football Union v Clark Smith Partnership Ltd & Anr

[2022] EWHC 956 (TCC) 

During works to upgrade Twickenham rugby stadium for the 2015 World Cup, the RFU engaged Clark Smith to design the ductwork and Conway to install it. The RFU and Conway entered into a JCT Standard Building Contract without Quantities 2011. The RFU also obtained an all-risks insurance policy.

The RFU said that there were defects in the ductwork which caused damage to the cables when they were pulled through it. The RFU was indemnified under the terms of the all-risks policy in respect of the replacement and related costs but said that Clark Smith and Conway were liable for those losses because of defects in the design of the ductwork and workmanship deficiencies.

Conway said that it was co-insured with the RFU under the all-risks policy and so had the benefit of the cover to the same extent as the RFU. The result was that the RFU could not bring claims in respect of those alleged losses as they were covered by the policy, and it could not make a subrogated claim (on behalf of insurers) in respect of the sums already paid out under the policy.

The RFU said that Conway was not an identified party or co-insured. Whilst the RFU had entered the all-risks policy as an agent for Conway as its undisclosed principal, the RFU’s authority was derived from the terms of the contract. The insurance obtained for Conway had been such as to satisfy the requirements imposed on the RFU under Option C of the JCT contract but no further. Option C required the RFU to arrange insurance that provided cover to Conway in respect of physical loss or damage to the work executed or to site materials, no more.  Accordingly, Conway’s cover under the policy was limited to that extent and, in particular, did not extend to the insured losses for which the RFU had been indemnified by insurers. 

The all-risks policy included the statement that an exclusion of “all loss or damage to the property insured due to defective design, plan, specification, materials or workmanship” would not accord with the definition or the insurance options. It noted that, a wider, all risks cover might be available but that it was “not standard.”

The core question was whether or not the insurance of Conway under the all-risks policy was limited to the extent of the cover that was required under Option C of the amended JCT contract in which case Conway was not co-insured with the RFU in respect of the relevant loss and the waiver of subrogation would not preclude a claim by insurers. 

The starting point for Eyre J was the core principle that the law does not allow an action between two or more persons who are insured under the same policy against the same risk. However, this principle could be over-ridden by the express terms of the contract.  Here, the terms of the contract determined the existence and extent of Conway’s insurance cover under the all-risks policy. 

The Judge felt that the terms of the letter of intent, all-risks policy and contract were clear. The effect of those documents and the terms of Option C was that the RFU was obliged to take out insurance which gave Conway cover in respect of physical loss or damage to the work executed or to site materials. 

However, it was also clear from those documents that insurance in respect of the cost of rectifying damage caused by Conway’s own defective works was excluded.

Conway disagreed saying that, if the documents were read in light of the parties’ dealings at the time, there was an agreement or, perhaps, an understanding that the RFU would obtain comprehensive insurance for Conway. The Judge agreed that the manager of a firm providing project management services to the RFU believed that, in a previous project at Twickenham, there had been difficulties because of disputes between different contractors and between their different insurers as to their responsibilities and obligations. 

As a result, the manger considered that a comprehensive project insurance policy covering all the contractors would be the solution to this problem. This would require the insurance to be more extensive than that envisaged in the standard terms of the JCT contract.

The Judge accepted that the manager (and Conway) believed that the intention had been for comprehensive insurance cover creating a fund, recourse to which would be the sole avenue for making good the relevant loss or damage. However, whether or not this understanding was accurately reflected in the actual terms of the agreement was something different.

The parties were substantial entities dealing at arm’s length. The project was a major exercise which involved the RFU engaging several sub-contractors and, in relation to which, it was acting through a number of professionals including solicitors and insurance brokers. Conway was a substantial civil engineering business with an in-house legal department and an internal insurance manager. The terms were agreed between teams of a number of professionals on each side – not just two individuals.

The letter of intent stated expressly that it was envisaged that the contract which would be entered between the RFU and Conway would be in the terms of the JCT contract and that, if such a contract was entered, it would apply retrospectively and supersede the letter of intent. The contract, when entered, was in the form of the JCT contract. However, it was subject to a number of bespoke amendments. The JCT contract sets out a detailed structure for allocating risks and responsibilities. Different options were available in respect of the insurance arrangements. The parties chose Option C but did so without any express modification or expansion of its effect.

The claim here was for loss allegedly suffered by the RFU as a consequence of damage to the cabling caused by deficiencies on the part of Conway in respect of the ductwork. The Judge asked whether the RFU intending to take out insurance covering Conway in respect of the liability for such loss with the consequence that the RFU’s recourse should be limited to a claim under the policy? It was not. 

The Judge was satisfied that the all-risks policy came into effect on the basis that it was providing the cover contemplated by Option C in the JCT contract. It was doing so in respect of the project as a whole, but it was not going beyond that. It did not provide a common fund recourse, which was to be the RFU’s sole redress for loss flowing from breaches by Conway or any other contractor. 

The all-risks policy insured both the RFU and Conway, but they were not insured to the same extent in respect of the same risk. In particular, they were not co-insured in respect of the losses which the RFU was said to have suffered by reason of damage to the cables resulting from defects in the ductwork and for which the RFU had been indemnified by insurers.

The RFU were able to proceed with their claim. 

Decision affirmed on appeal: see Issue 275.

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