In Haberdashers’ Aske’s Federation Trust Limited v Lakehouse Contracts Limited, the TCC considered whether project insurers were entitled to bring a subrogated claim against sub-contractors on the insured project or, to put it another way, whether the sub-contractors were entitled to the benefit of the project insurance.

Haberdashers and the other claimants (the Claimants) had contracted with Lakehouse to perform major construction works to a school in Lewisham. In turn, Lakehouse contracted with a number of sub-contractors, including Cambridge Polymer Roofing Ltd (CPR) for the roofing works. Lakehouse, as it was required to do by its agreement with the claimants, obtained project insurance with the third party defendants (the Project Insurers). Separately, CPR had agreed to take out its own liability cover, which it did for a limit of £5m.

While CPR was carrying out “hot works”, a fire occurred and caused severe damage to the buildings. The Claimants sued Lakehouse, who issued a claim against CPR. CPR then issued its own claim against the Project Insurers on the grounds that it should have the benefit of the project insurance. The Claimant’s claim was settled by Lakehouse for £8.75m, leaving the claims brought by Lakehouse against CPR and CPR against the Project Insurers. In reality, the settlement had been paid by the Project Insurers so the Lakehouse claim against CPR was a subrogated claim brought by the Project Insurers. The claim against CPR was limited to the extent of CPR’s liability insurance, i.e. £5m.

CPR argued that it was a co-insured under the Project Insurance and that as a result, the Project Insurers had waived their right of subrogation against CPR. Although CPR was not named as a co-insured, it was common ground that it fell within the class of sub-contractors who would ordinarily be a co-insured, but the Project Insurers argued that there was an exception where the sub-contractor was required to maintain its own liability insurance.

The case was argued and analysed in a number of ways, but ultimately the Court held that the effect of the express term in the sub-contract between CPR and Lakehouse which required CPR to take out its own liability insurance was that CPR did not have the benefit of the Project Insurance. The Judge’s preferred analysis was that of “standing offer”. The standing offer made by the Project Insurers was to insure all sub-contractors joining a defined grouping upon execution of the relevant sub-contract, and the acceptance of the offer would be to imply a term into the contract between Lakehouse and CPR. However, the contract between CPR and Lakehouse contained a term that CPR would obtain its own insurance so a conflicting term that it was part of the defined grouping of insureds under the Project Insurance could never be implied. CPR was not, therefore, a co-insured under the Project Insurance.

The judge cited the recent case of Gard Marine and Energy Ltd v China National Chartering Co Ltd, in which the Supreme Court considered whether or not co-insureds were precluded from claiming damages from one another by virtue of their co-insurance. However, having decided that CPR was not a co-insured under the Project Insurance, he did not develop this analysis.

The analysis in the case is complicated, but the underlying message is that sub-contractors should not assume they have the benefit of project insurance policies. Having agreed to obtain its own insurance, CPR could not imply a term into its contract with Lakehouse that it was entitled to the benefit of the Project Insurance.