GB Building Solutions Limited v SFS Fire Services Limited (2017) EWHC 1289 (TCC) concerns questions which frequently arise in construction disputes, namely: when may a recovery claim be made against a coassured and in particular, at what stage does a joint insurance policy defence cease?

Building works were carried out in 2009 with GB Building Solutions (“GB”) as the main contractor. SFS Fire Services (“SFS”) was the sub-contractor that installed the sprinkler system which caused a flood sometime during the Christmas shut down period, between 23 and 29 December 2009. Losses were in excess of £600,000. There was a joint policy of insurance which offered some protection to SFS , but the issue was: when had SFS’s entitlement to cover ceased?

GB submitted that the flood had occurred after practical completion (“PC”) of the sprinkler system installation, i.e. the sub-contract works. SFS disagreed and said that PC had not occurred as the correct interpretation was that PC of the sub-contract works did not to take place until completion of the main works.

On 26 October 2009 SFS had issued test certificates confirming that the required pressures had been achieved in the sprinkler installation. These were countersigned by GB site manager. The judge found that the system had been commissioned and tested as required under the contract on that date. On 1 December 2009 SFS emailed the signed test certificates and on 9 December 2009 a demonstration of the sprinkler system took place.

The judge held that PC of the sub-contract works was deemed to have occurred on either 26 October or 1 December 2009, not at the later date that the main contract works were completed. At the time of the escape of water SFS no longer had a contractual entitlement to the benefit of the joint cover, so SFS was unable to defend a recovery claim on the basis that they were co-assured.

The clear words of the contract were applied and SFS’s attempt to rely on “common business sense” was rejected by the court. This case illustrates the need to analyse the contractual arrangements in place to determine the parties’ intentions with regard to risk allocation, and the defences that might be available when damage occurs during or shortly after completion of building projects.