Case summary: The claimant had been negligent in the design and installation of a fire protection system at the defendant’s new assembly plant causing loss and damage to the defendant. The claimant argued that even though it was at fault, and had given an indemnity in respect of latent defects, the defendant was not entitled to compensation. Under the terms of the contract, it argued, the defendant was responsible for taking out joint names insurance, which it had failed to do. The court agreed. The joint names insurance would have covered the claimant for the type of losses suffered. The indemnity did not help the defendant, as it had to be read as subject to the special joint names insurance provisions set out in the contract. On that basis the claimant was not liable to pay compensation to the defendant.

Comment: Parties must ensure that they comply with all their insurance obligations under the contract. Where a building owner requires an indemnity from a contractor, he should consider where this fits in with insurance and in particular, whether he is intending any contractor’s negligence to be covered by the terms of the “Contractor’s All Risks” (or similar) policy.

Tyco Fire and Integrated Solutions (UK) Ltd v Rolls-Royce Motor Cars Ltd (29/06/07)