Co-insurance: Is it a complete defence to claims for damage caused to the works?

Paul Reed QC

May 2017

A paper presented to a meeting of the Society of Construction Law in London on 27th March 2017

It is common in construction projects for the head contractor to be required to insure against the risk of damage to 'the works' in the name also of other project parties (notably subcontractors) - what is often known as contractor's all risks (CAR) insurance (or builder's risk insurance in the USA).Paul Reed QC explores the conditions which a project party must fulfil to be able to claim on a policy in which it is named, but which it has not actually taken out. There are two routes in law: via agency at common law (on which the case law does not speak with one voice) or via the Contracts (Rights of Third Parties) Act 1999, on which there is little authority in an insurance context. The paper also discusses the basis and scope of the principle that an insurer in such a situation should not be able to exercise its normal right of subrogation on behalf of one of those named on a CAR policy against a different party also named on the same policy: a difficult issue not yet clearly resolved by the courts.

Introduction - The basic principles - Enforcing insurance by a third party according to the rules of agency - Enforcement under the Contracts (Rights of Third Parties) Act 1999 - Co-insurance as a defence to a subrogated action in the name of a co-insured - Conclusions.

The author: Paul Reed QC is a barrister practising at Hardwicke Chambers in London and author of Construction All Risks Insurance.

Text: 22 pages