Gard Marine and Joint Insurance – Treat with Caution
Joint Names Insurance is increasingly considered for use in large or complex construction projects. Insurance, of course, provides the parties with the comfort of having hedged a risk for a fixed cost, and a joint names policy provides the added benefit of minimising the disruption caused by an insured event since the parties won’t need to dispute liability under separate insurance contracts.
The joint insurance policy concept is a great help in many situations. However, the recent Gard Marine* case suggests additional implications for parties where they enter into joint names insurance; the implications most likely to affect the Employer (or the higher tier contractor in a sub-contract relationship) in practice.
In Gard Marine, the issue was whether (when two parties enter into a contract requiring one of them to obtain a joint names insurance policy for both of them) there was an implied term that the parties would only rely on the insurance for those types of losses covered by the insurance.
Previous cases had run that argument as a defence to claims against a contractor, for example SSE v Hochtief**, but were not successful. In SSE v Hochtief, the judge considered (amongst other reasons) that the effect of express terms of the construction contract dealing with liability between the parties was to imply that a liability remedy was agreed between the parties. For example, the high limit of liability was sufficient to rebut an implication that the joint insurance should be the parties’ only recourse for the loss suffered.
On the other hand, in Gard Marine the Supreme Court found that an agreement to obtain a joint insurance policy in relation to a ship charter implied a term that the parties would waive each others’ liability in relation to risks within the scope of the insurance. In the absence of any other drafting, the parties were reliant on the insurance policy to cover the relevant risks, and could not seek to recover from the other party should the insurance policy fail to respond in part or in whole to their losses.
Although this was not a construction contract, the stage seems to be set for a similar scenario between construction parties. Parties entering agreements requiring the use of joint names insurance should consider reserving their right to claim against the other party if the joint insurance fails to respond – or in the case of those more likely to be subject to a claim, may wish to stay quiet and hope that the joint names policy acts as an exclusion to their liability!
Gregg Latchams Limited has extensive experience advising Employers, Contractors and Consultants in contentious and non-contentious projects of all scales. Please contact Andrew Evans for more information on 0117 906 9252 or Andrew.email@example.com
*Gard Marine and Energy Limited v China National Chartering Company Limited and Daiichi Chuo Kisen Kaisha (2017) UKSC 35
** SSE Generation Ltd v Hochtief  CSOH 92