When something that is supposed to stand up collapses, it has all the parties involved rushing to dig out their insurance policies and check their cover. This is rather like checking to see if your stable has a door as you watch the hind quarters of your expensive horse disappear over the horizon.
Aspen Insurance (“Aspen”) v Adana Construction (“Adana”) relates to a tower crane that fell over in 2009 on a Bowmer & Kirkland construction site in Liverpool. The unfortunate crane driver was seriously injured, extensive damage was caused to the crane and surrounding properties and the resulting litigation is on-going. [See previous report here.]
Adana, facing potential liability of tens of millions, called on its Combined Contractor’s Liability insurance policy (the “Policy”) for assistance. Its insurer, Aspen, denied liability and asked the court to declare that Adana had no public liability cover in the particular circumstances. The first instance judge ( EWHC 1568 (Comm)) declined the request and Aspen appealed (EWCA Civ 176). Its appeal was partially successful.
Adana was responsible for (among other things) the supply, delivery and installation work associated with the casting and fixing in place of a reinforced pile cap which was to form the tower crane’s base.
Liability has not been settled but when the crane fell over the pile cap that Adana had constructed came away from the top of the pile in one piece along with the (apparently undamaged) dowels that were intended to tie the cap and the pile together.
The Policy contained the following provision: “It is agreed that this Certificate does not indemnify the Assured in respect of loss and damage to any superstructure arising from the failure of the Assured’s foundation works to perform their intended function.”
Aspen raised the following arguments to persuade the Court of Appeal that this provision applied to exclude its liability for damage to the crane:
- the tower crane was a superstructure;
- the pile cap Adana had constructed was a foundation; and
- the pile cap had failed to perform its intended function.
Not entirely surprisingly it succeeded on all three points.
What is rather surprising is that this provision was in the Policy. In the business of building blocks of concrete whose sole purpose is stopping tower cranes from falling over (albeit as part of a larger arrangement) one would think that damage to the crane (property of a third party) if the job is not done correctly would be one of the major commercial risks requiring insurance cover.
In this particular case because the amount of money that Aspen nominally “saved” as a result of this provision (£1.7 million) is likely to be dwarfed by the remainder of the claim against which its appeal was denied. Its liability will probably actually be limited by the overall cap in the policy. In less extreme circumstances however, the provision could still have proved costly for Adana.
Why this provision was in Adana’s policy is of course strictly its own business but before you sign up for your next major insurance renewal make sure that your policy covers the real commercial risks to which your business is exposed. Do not risk finding out that you are not insured only after the worst has happened.