Encia Remediation Ltd v Canopius Managing Agents Ltd – design and build contract

[2007] EWHC 916 (Comm)

The claimant company entered into a contract with Shepherd Homes to design and carry out piling works for a residential development on reclaimed land. Two years later, properties constructed on the land began to show signs of cracking and Shepherd Homes notified the claimant of a potential claim and subsequently succeeded in their action alleging negligent design.

The claimant made a claim against the defendant professional indemnity insurers. The insurers contended that Shepherd Homes’ claim, which arose from a contract to construct and install a piling system, was excluded under the policy.

Policy exclusion number two provided “this policy does not cover any liability whatsoever arising out of .. any claim arising from the provision of advice design or specification where the insured contracts to manufacture construct erect install or supply materials or equipment unless defined in the business as stated in the schedule”. The business was defined as “professional services arising out of … civil and environmental engineering and as more fully declared in the proposal form referred to below and any accompanying information submitted with the proposal form”. The defendants argued that “civil and environmental engineering” covered the design and supervision of the work but not the construction work itself.

As part of the factual matrix, the judge took account of the previous insurance arrangements for the insured, previously part of the AIG Engineering Group, which were known to all the underwriters involved. He concluded that the policy covered all Encia’s business activities in the field of civil and environmental engineering and embraced design and build contracts and well as design contracts.