Webinar - Sky Central Case Update



The High Court has handed down the hotly anticipated judgment in Sky & Mace v Riverstone, which concerned a claim by Sky and Mace for the cost of remedial works to the roof at Sky Central. We will be covering the key issues in dispute and the Court’s findings, which are likely to be of general interest to contractors and CAR practitioners (and enthusiasts!).


Rob Goodship, Associate Partner

Reach for the Sky? – judgment handed down on Sky Central

Sky UK Limited & Mace Limited v Riverstone Managing Agency Limited & Others [2023] EWHC 1207 (Comm)


The High Court has handed down the hotly anticipated judgment in Sky & Mace v Riverstone, which concerned a claim by Sky and Mace for the cost of remedial works to the roof at Sky Central, Europe’s largest flat timber roof. The sums claimed for the two remedial schemes put before the Court were both in excess of £100m.

Whilst Sky, as principal insured and loss payee under the building contract, has been awarded an indemnity in principle, the quantum of that indemnity is subject to either agreement or, failing that, determination by the Court, given Mr Justice Pelling’s finding that none of the remedial schemes put before the Court sufficiently represented the remedial works necessary to address the damage as at the end of the Period of Insurance. That said, the Judge found that one of the schemes presented by insurers “most closely approximates” to the damage in need of remediation at the end of the Period of Insurance, and has encouraged the parties to agree the quantum of the appropriate temporary works which need to be added to that scheme.


The full judgment is worth a read for all CAR practitioners (and enthusiasts) but the real take aways are:


Whilst Sky is the first court decision anywhere in the world to consider the DE5 defect exclusion, it actually does no more than provide (at paragraph 29) a slightly clearer articulation as, based on the Judge’s findings, he didn’t need to consider what actually constituted an additional cost of any additional improvement works.

The reason for that is because his judgment was premised on one of insurers’ schemes being the most appropriate (in the circumstances) which (unsurprisingly) did not include any improvements to the original design, plan, specification, materials or workmanship.


Sky follows closely after the Court of Appeal’s decision in RFU that was handed down in April (https://www.fenchurchlaw.co.uk/worth-a-try-judgment-handed-down-on-rugby-football-union-appeal/).

The Judge followed the reasoning in the first instance decision in RFU which Lord Justice Coulson said was “unassailable” by the Court of Appeal. Here, Mace was found to be a co-insured under the project policy but, as a result of the building contract entered into with Sky, only to Practical Completion (“PC”) and not to expiry of the Maintenance Liability Period (“MLP”) - only Sky had the benefit of that cover.

Mr Justice Pelling rejected Mace’s argument that a distinction should be drawn, and that it therefore benefited from, being a named in the policy (as opposed to falling into a prescribed category) as being “unprincipled and unsupported”. He found that there was “ample authority” that when deciding the scope and extent of the insurance cover available, it was necessary to consider the scope that the contracting insured agreed to procure, and that cover will not generally extend beyond what is contained in that agreement.

Mr Justice Pelling confirmed (at paragraph 58), and in line with the thinking of the majority in Gard Marine, that the effect of this particular contract was that neither Sky nor insurers can recover any pre-PC loss or damage against Mace, but that Mace was required to remediate and has no entitlement to a sum beyond that which was recovered under the policy.

Physical damage

The judge rejected insurers' definition of physical damage as occurring at a ‘tipping point’ when “structural change of such severity as to require replacement of the affected timber” as being "impermissibly narrow".

Instead he found that the physical damage occurred once water entered the roof cassettes on the basis that “the entry of moisture into the cassettes during the Period of Insurance is in my view a tangible physical change to the cassette as long as the presence of the water, if left unattended, would affect the structural stability, strength or functionality or useable life of the cassettes during the Period of Insurance or would do so if left unremedied”.

In relation to the timing of the occurrence of damage, this is arguably in line with Tioxide where it was found that damage occurred once the environmental conditions where damage was liable to occur were present.

The articulation in Sky is potentially wider than that though, which is likely to be very helpful for policyholders when there is ambiguity over the timing of the damage occurring, as it permits the earliest possible date on which damage is liable to occur if left unattended, which is frequently a source of dispute, particularly in relation to water ingress claims.

Aggregation/ deductibles

The other major battle ground between Sky/Mace and insurers, and a point that this is increasingly being taken by CAR insurers in relation to modern methods of construction (including cassettes and modular pods), was the applicable number of deductibles which was determined by the number of ‘events’.

Insurers’ position was that the damage to each of the 472 cassettes was an ‘event’, whereas the Claimants said that there was one event, namely the decision not to use a temporary waterproofing system when installing the roof cassettes, which permitted water ingress during construction.

Mr Justice Pelling said that, in this policy, the “single unifying event must be an error or omission in the design plan specification materials or workmanship of the property Insured that has suffered damage as a result of such defect” when a claim was recoverable under DE5.

Applying the unities of time, place and cause, and following Mr Justice Butcher's finding in Stonegate (https://www.fenchurchlaw.co.uk/court-hands-down-judgment-in-much-anticipated-covid-19-bi-cases-the-takeaways-for-policyholders/) that a decision (or plan) was capable of being an event if it satisfied those unities, the judge agreed with Sky and Mace that there was only one event and, therefore, one deductible was to be applied to Sky's claim.Appropriate remedial scheme

The claim presented by Sky and Mace was slightly unusual given that the remedial works had not taken place by the time the claim got to trial, which seemingly resulted in the Judge being in some difficulty when determining the appropriate indemnity. Helpfully for policyholders though, Mr Justice Pelling’s instinct in response to assertions that Sky and Mace’s claims had failed as neither of their schemes were ultimately awarded was that it would be “counter intuitive” that an insured which had proved some damage would be left without remedy.

The actual quantum of Sky’s claim remains unresolved, but the judge saw no difficulty in principle with the various schemes being ‘mixed and matched’ in order to identify the appropriate indemnity.


Although the judgment does not delve into the correct interpretation and application of DE5 as perhaps hoped, it does contain a number of helpful nuances in relation to typical coverage issues under CAR policies, which will be helpful to property and contract works policyholders generally.

Rob Goodship is an Associate Partner at Fenchurch Law

Webinar - Tackling Co-Insurance: Court of Appeal hands down judgment in Rugby Football Union



Associate Partner, Rob Goodship will be delving into the tricky issues of co-insurance for contractors, including an analysis of the recent decision of the Court of Appeal and some tips for avoiding disputes.


Rob Goodship, Associate Partner

Worth a Try? – judgment handed down on Rugby Football Union appeal

FM Conway Limited v The Rugby Football Union, Royal & Sun Alliance Insurance PLC, Clark Smith Partnership Limited

The Court of Appeal has handed down its judgment following FM Conway’s appeal of the High Court’s decision that it did not enjoy the same level of cover as its employer. Our previous article commenting on the first instance judgment can be found here.


The decision regards the potentially complicated factual and legal issues about the nature and extent of insurance cover obtained by one party on behalf of another. It was common ground at the first instance hearing that FM Conway was an insured under the project policy secured for the refurbishment of Twickenham stadium, but the extent of that cover was disputed by insurers.

FM Conway’s appeal was rejected by the Court of Appeal, with the leading judgment from Lord Justice Coulson providing a firm endorsement of Mr Justice Eyre’s decision that FM Conway was not insured under the project policy for damage to existing structures caused by its own defective work, but cover was instead restricted to specified perils in accordance with the (unamended) JCT Option C.

It is clear from the judgment that Lord Justice Coulson was in full agreement with Mr Justice Eyre, referring to his decision as “careful”, “unassailable” and “entirely in accordance with the authorities”.


The background facts are contained in our previous article but, in short, the underlying claim includes a subrogated claim by RSA in relation to the cost of remediating damaged cables, for which it had indemnified RFU as principal insured. FM Conway raised a co-insurance defence to that claim, asserting that it enjoyed the full benefit of the project policy obtained on its behalf by RFU.

FM Conway appealed the first instance decision on five grounds, albeit ground 1 was clearly FM Conway’s primary argument: whether the High Court applied the correct test for ascertaining the necessary authority and intention of the insuring party, the RFU. It was submitted on behalf of RFU and RSA, and then accepted by Lord Justice Coulson, that if ground 1 failed then so too must grounds 2, 3 and 4 as they were largely variations of the first ground and/ or were contingent on that ground succeeding.

It was held by the Court that Mr Justice Eyre did apply the correct test, given that he “paid particular attention to the underlying contract between the RFU and FM Conway. In that, he was following what Lord Toulson said was the correct approach in Gard Marine”. Lord Justice Coulson went on to say that “in any case where there is an underlying contract … it would be counter-intuitive if that was not at least the starting point for any consideration of authority and intention” to insure.

Lord Justice Coulson went on, as Mr Justice Eyre had in the first instance decision, to make clear that whilst the pre-contractual discussions between representatives for Conway and the RFU, respectively, regarding insurance arrangements could be taken into account (which were the main thrust of Conway’s argument that it had wider cover), they could not displace the clear interpretation of the building contract.

It was affirmed by the Court that “extraneous evidence” of a contrary authority or intention to insure could be relied on (similarly to Mr Justice Eyre’s finding that “compelling evidence” could be relied on), but the relevant investigations “will start (and possibly finish) with the underlying contractual arrangements agreed between the parties”.

The Court also made frequent reference, contrary to FM Conway’s reliance on the witness evidence which it said demonstrated an authority and intention of the RFU to secure wider cover, that both parties were represented by legal and insurance professionals such that had there been an intention to secure wider cover beyond that in Option C of the JCT Contract then it would have been reflected in the building contract ultimately agreed. Lord Justice Coulson said that to adopt FM Conway’s attempt to rely on early/ pre-contract discussions was “untenable” as it would enable a party to “ignore any subsequent stages of the actual negotiations”.

Guidance on co-insurance generally

Following his summary of the law in this area generally, Lord Justice Coulson provided (at paragraph 53 of the judgment) the following guidance in relation to co-insurance:

“53.1 The mere fact that A and B are insured under the same policy does not, by itself, mean that A and B are covered for the same loss or cannot make claims against one another;

53.2 In circumstances where it is alleged that A has procured insurance for B, it will usually be necessary to consider issues such as authority, intention (and the related issue of scope of cover). Such issues are conventionally considered by reference to the law relating to principal and agent …

53.3 An underlying contract between A and B is not a necessary pre-requisite for a proper investigation into authority, intention and scope …

53.4 On the other hand, where there is an underlying contract then, in most cases, it will be much the best place to find evidence of authority, intention and scope …

53.5 That is not to say that the underlying contract will always provide the complete answer. Circumstances may dictate that the court looks in other places for evidence of authority, intention and scope of cover”


Whilst the result is not surprising (especially as Lord Justice Coulson said that the first instance decision was in accordance with the existing authorities), it represents a clear articulation of the principles in this often complex area.

For policyholders in FM Conway’s shoes, it is key that if there is an intention for contractors to enjoy the same level of cover under the project policy as the employer/ principal insured, that the contractual documents make that clear and, where necessary, any standard forms are appropriately amended. That way, there is no need to look for other compelling or extraneous evidence to demonstrate that wider authority and intention which, as is made clear in the facts of this case, might be difficult to do.

Rob Goodship is an Associate Partner at Fenchurch Law

Co-Insurance, it’s a bit of a scrum

The Rugby Football Union v Clark Smith Partnership Limited & FM Conway Limited [2022] EWHC 956 (TCC)

This recent High Court decision once again shines a light on the tricky issue of co-insurance under project CAR policies, in particular the difficulties faced by contractors of all levels when trying to demonstrate the extent of cover in the face of a subrogated claim from project insurers.

It’s the most noteworthy judgment on the issues since Haberdashers’ Aske’s Federation Trust in 2018 (which, as we’ve stated previously, is a bad decision for policyholders), and is a helpful refresh of the issues, if only to remind parties to construction projects to ensure that the contractual arrangements for any project accurately reflect the intention and authority of the party obtaining insurance cover for others.


The Rugby Football Union (“RFU”) was undertaking significant works at Twickenham in 2012 in order to prepare for the 2015 Rugby World Cup. It engaged Clark Smith Partnership Limited (“Clark Smith”) to design buried ductwork which was to contain power cables, and FM Conway Limited (“Conway”) to install it. RFU and Conway contracted on the basis of a JCT Standard Building Contract without Quantities 2011 (“the JCT”), some of which (but importantly not all) was the subject of agreed amendments.

RFU asserted that the ductwork was defective which caused damage to the cables as they were pulled through (by a third party), which resulted in replacement costs of £3,334,405.26, for which it was indemnified by the project insurers, Royal & Sun Alliance Plc (“RSA”).

The project policy contained a DE3 standard form defects exclusion, which meant that the cost of addressing the defective ductwork was excluded, but the remedial cost of the consequential damage to the cables was covered.

RSA sought to recover those sums from Conway (and Clark Smith) in a subrogated recovery action on the basis that the damage had been caused by its defective workmanship. In response, Conway issued Part 8 proceedings seeking a declaration that it was a co-insured under the project policy and that it had the benefit of cover to the same extent as RFU (as principal insured), which prevented RSA from bringing the subrogated claim against it.


In relation to the claim brought by RSA (in relation to which it stood in RFU’s shoes), Mr Justice Eyre was asked to consider whether the sums paid by RSA to RFU were irrecoverable because RSA could not exercise subrogation rights and/ or on a proper analysis of the project policy and/ or the contract documents that RFU and/ or RSA were not entitled to claim the insured losses.

The judgment contains a very useful summary of the law regarding co-insurance to date, including the basis on which subrogated claims between parties to an insurance policy can be barred by reason of circuity of action (Co-operative Retail Services Ltd [2002] UKHL 17) and the basis on which one insured may obtain cover for another (Gard Marine & Energy Ltd [2017] UKSC 35).  However, the key aspect here was not the existence of cover in the first place, but the extent of that cover for a co-insured.

The specific consideration here was whether Conway had the benefit of the full cover under the project policy, which provided cover for damage to other property insured caused by Conway’s defective works, or whether its cover was restricted to damage caused by Specified Perils as provided for by the unamended part of the JCT.

Mr Justice Eyre was at pains to stress (guided by the above authorities, but also National Oilwell (UK) Ltd [1993] 2 Lloyd’s Rep 582) that the contract is key when determining the intention and authority of the principal insured when securing cover, stating:

“74. What is important is that the authorities are clear that in order to determine whether the insurance cover which a policy effected by, in my example, the employer or contractor applies to the contractor or sub-contractor and if to what extent (with the latter point determining the extent to which they are co-insured) it is necessary to look to the terms of the contract between those parties. It is those terms which provide the key to the existence and extent of the insurance cover.”

“88. …  when a person becomes a party as a consequence of the actions of another person then the terms of the contract between the insured party and that other govern the extent of the insurance”

In relation to the intention and authority of RFU, Mr Justice Eyre found (despite witness evidence to the contrary relied on by Conway, that the insurance obtained by RFU was intended to be more extensive than envisaged by the JCT), that the contract documents read together (including the JCT) did not demonstrate an intention for the project policy to create a fund which would be the sole remedy for loss suffered by RFU as a consequence of a breach by Conway.

Whilst Conway was an insured under the project policy, the extent of that cover was that as envisaged in the JCT and no wider, such that it was not a co-insured in relation to the damage for which RSA had indemnified RFU. He went on to find (again consistent with National Oilwell) that the waiver of subrogation clause in the policy only related to the matters for which Conway had cover under the policy, and so didn’t prevent a claim by RSA.


This judgment doesn’t alter the previous state of the law in this area, but is a salutary reminder to make sure that the contractual documents are in line with the expectations of the parties.

Mr Justice Eyre indicated that “compelling evidence to counter the inferences from the natural reading” of the JCT may have altered the result (which is in line with the “other admissible material” referred to in National Oilwell), but that evidence was not present here. Rather, the judge found it “surprising” that the JCT was subject to amendment elsewhere, but not in relation to the insurance for the works. If the parties had intended the extent of cover to be different from that envisaged by the unamended JCT, then presumably it would have been simple enough to reflect that in an amended version of the JCT. The absence of those amendments seems to have been an important consideration in relation to the parties’ intentions.

If there’s an intention for members of the project team to have a benefit under any project policy, it is vital that the underlying contractual documents accurately reflect the full extent of the principal insured’s intention and authority in that regard.

Rob Goodship is a Senior Associate at Fenchurch Law

Fenchurch Law gavel

The Good, the Bad & the Ugly: 100 cases every policyholder needs to know. #16 (The Good). Technology Holdings Ltd v IAG New Zealand Ltd [2008]

Welcome to the latest in the series of blogs from Fenchurch Law: 100 cases every policyholder needs to know. An opinionated and practical guide to the most important insurance decisions relating to the London / English insurance markets, all looked at from a pro-policyholder perspective.

Some cases are correctly decided and positive for policyholders. We celebrate those cases as The Good.

Some cases are, in our view, bad for policyholders, wrongly decided, and in need of being overturned. We highlight those decisions as The Bad.

Other cases are bad for policyholders but seem (even to our policyholder-tinted eyes) to be correctly decided. Those cases can trip up even the most honest policyholder with the most genuine claim. We put the hazard lights on those cases as The Ugly.

#16 (The Good)

The Good

In another useful decision for policyholders under CAR policies (see our earlier article regarding ‘The Orjula’), but also damage policies generally, the High Court of New Zealand found (at para 65 of its judgment) that damage (as distinct from physical damage) can be established by one of more of:

a) a material risk to insured property which did not exist before the relevant event;

b) an event which rendered the insured property not fit for its intended use; and/ or

c) the possibility of malfunction during use as a result of the relevant event, which would require the insured property to be dismantled to determine the risk.

Whilst this authority isn’t binding on an English court, it would certainly be persuasive and the last category in particular is helpful to policyholders seeking cover for damage, as the mere possibility of malfunction which itself has not occurred would trigger cover under a policy responding to damage based on this authority.

The decision

The claimant supplied credit card terminals to retailers, 2,051 of which were stored in a basement that flooded on 7 February 2005. All of the containers in which the terminals were stored came into contact with flood water (but only around a quarter of the terminals themselves), and all containers were exposed to increased humidity. The claimant claimed under its Business Assets insurance policy (“the Policy”) for loss or damage to all of the terminals, the insuring clause in the Policy stating:

If during the Period of Insurance specified in the Schedule there happens Loss or Damage unintended and unforeseen by the Insured, except as may be excluded, to the PROPERTY AND EXPENSES INSURED, then the Insurers will indemnify the Insured in respect of such Loss or Damage as expressed in the BASIS OF LOSS SETTLEMENT and in addition the Insurers will indemnify the Insured in the manner and to the extent separately stated herein.

Despite being capitalised terms, Loss and Damage were not defined in the Policy. The claimant’s claim was accepted in relation to the terminals which came into direct contact with flood water, but insurers declined cover for the remaining terminals on the basis that they were neither lost nor damaged.

The court was asked to consider whether the insuring clause had been triggered in relation to the other terminals stored in the basement, essentially whether they were damaged because the manufacturer of the terminals had withdrawn its warranty and / or because the operator of the terminals’ intended network had refused to permit those units to be connected because of the risk that they would malfunction.

The claimant relied on expert evidence which included that it was standard industry practice for manufacturers to dismantle terminals returned to it to ensure their continued security and reliability following suspected damage. This, coupled with the low cost of producing terminals compared with the higher cost to dismantle, meant that terminals were often written off/ disposed of rather than being repaired.

The court’s analysis included a discussion concerning the difference between “physical damage” on the one hand and “damage” on the other, and concluded that the parties had intended the Policy to have the wider, unqualified damage cover, as opposed to cover being restricted to physical damage.

There was a detailed discussion of the damage authorities, including Transfield and Quorum AS, but most notably Ranicar v Frigmobile Pty Ltd, which the court regarded as the leading authority on “damage” in an insurance context. That case concerned scallops which could no longer be exported as they were temporarily and accidentally stored above -18 degrees Celsius, with that change in temperature being enough to constitute the physical change required to trigger cover for damage under the relevant insurance policy.  The court in Ranicar held that whereas “physical damage” may require a permanent and irreversible change in physical condition, “damage” could occur when an adverse change in physical condition was both transient and reversible.

Deciding the Technology Holdings case, Woodhouse J (quoting a leading insurance text) said that the essence of Ranicar in relation to damage was that “it is normally sufficient if the damage is in the form of diminution in value or functionality”, but that element was not enough by itself – for damage something must happen to the property itself followed by the impairment in value or usefulness.

Applying Ranicar to the terminals which did not directly come into contact with flood water, Woodhouse J said that:

“…there was an occurrence – the flooding – which was unintended and unforeseen by the insured and which happened to the property. Following this event, which may or may not be similar to the temperature rise in Ranicar, the plaintiff found it could not sell the units. For the reasons discussed, I am satisfied that, if the plaintiff cannot prove that the units were “physically damaged”, there nevertheless will have been “damage to the property” for the purposes of the plaintiff’s Business Assets insurance policy if the plaintiff can establish the following: Because the units were stored in premises affected by flooding the units would malfunction during use in the network on a date earlier than the date on which the units would normally be withdrawn from use and in consequence they are not fit for their intended use”.


In addition to helping to cement Ranicar’s status as a leading authority on damage in the insurance context, it arguably goes one step further by holding that the mere possibility of malfunction was sufficient to constitute damage where that risk impacting on value or usefulness.  The logic of the decision is sound, and merely extends existing principles rather than taking an entirely new approach, and the decision is certainly Good for policyholders.

Rob Goodship is a Senior Associate at Fenchurch Law

The Good, the Bad & the Ugly: 100 cases every policyholder needs to know. #14 (The Good & Ugly). Arch Insurance (UK) Ltd v FCA and others

Welcome to the latest in the series of blogs from Fenchurch Law: 100 cases every policyholder needs to know. An opinionated and practical guide to the most important insurance decisions relating to the London / English insurance markets, all looked at from a pro-policyholder perspective.

Some cases are correctly decided and positive for policyholders. We celebrate those cases as The Good.

Some cases are, in our view, bad for policyholders, wrongly decided, and in need of being overturned. We highlight those decisions as The Bad.

Other cases are bad for policyholders but seem (even to our policyholder-tinted eyes) to be correctly decided. Those cases can trip up even the most honest policyholder with the most genuine claim. We put the hazard lights on those cases as The Ugly.

#14 (The Good & Ugly)

Arch Insurance (UK) Ltd v FCA and others [2021 UKSC 1]

The Good?  

The circumstances of FCA Test Case are widely known, and the case has been fairly regarded as a resounding (if not absolute) win for policyholders, having established coverage for Covid-19 business interruption losses under a variety of non-damage business interruption extensions.

Aside from the key policy trigger determinations, which are to some extent confined to the specific circumstances of the Covid-19 pandemic given that most insurers have now withdrawn cover of the type under consideration in the Test Case, perhaps the more significant outcome was the Supreme Court’s findings on causation, and the overruling of the notorious Orient Express v Generali case.

Previously highlighted in our series as one of The Bad, Orient Express first codified the ‘wide area damage’ principle under which insurers decline or reduce a policyholder’s business interruption claim in the event of a loss event causing damage to the wider area, rather than to the insured property only. So in the case of Orient Express, the claimant hotel was denied indemnity for losses following Hurricane Katrina in New Orleans, on the basis that the entire city was effectively destroyed, and ‘but for’ the damage to the hotel, it could not have done any business anyway. The egregious effect of the case was that, the more severe the loss event, the less coverage was provided by insurers.

The case finally fell for consideration by the Supreme Court in the FCA Test Case ten years later, and was unanimously overturned (including by the very judge that issued the original Orient Express decision itself). The approach that should have been taken, the Supreme Court said, was to view the damage to the hotel and the damage to the surrounding area as concurrent causes of loss which, following the principle in The Miss Jay Jay, would not preclude coverage where neither cause was expressly excluded under the Policy.  The policyholder in Orient Express should therefore have been entitled to recover the full extent of its losses arising from the hurricane, as should policyholders seeking indemnity for their Covid-19 BI losses.

The Ugly?

The Supreme Court’s approach to concurrent proximate causes is not necessarily all good news for policyholders, however.

It is a well-established principle of English law, affirmed by the Supreme Court in its judgment, that, where there are concurrent proximate causes of a loss, if one cause is an insured peril and the other cause(s) is / are uninsured then the policy should respond in full (The Miss Jay Jay), whereas if a cause is excluded then the policy will not respond (Wayne Tank). The potential for the Wayne Tank principle to be a practical problem for policyholders has historically been largely been mitigated by the Courts’ general reluctance to find that there is more than one proximate cause. However, the Supreme Court’s decision in the FCA Test Case suggests that concurrent proximate causes may be much more likely to arise in practice than had previously been appreciated.  The Supreme Court noted that both The Miss Jay Jay, and Wayne Tank, concerned interdependent concurrent causes (so that it was the combination of the two which made the loss inevitable) and went on to find that there is “no reason in principle why such an analysis cannot be applied to multiple causes which act in combination to bring about a loss (our emphasis). This significantly extends the doctrine of concurrent causes, particularly given that the Supreme Court went on to say that, in certain circumstances, the multiple concurrent causes do not have to meet the ‘but for’ test:

“there is nothing in principle or in the concept of causation which precludes an insured peril that in combination with many other similar uninsured events brings about a loss with a sufficient degree of inevitability from being regarded as a cause - indeed as a proximate cause -of the loss, even if the occurrence of the insured peril is neither necessary nor sufficient to bring about the loss by itself(our emphasis).

In some situations (the FCA Test case itself included!) this shift could lead to an increase in cover available to the policyholder and, on that basis, is a welcome development.

However, in our view there are also instances where this change would be unwelcome for policyholders in the context of exclusion clauses – for instance Design & Build contractors who almost always have a workmanship exclusion in their construction professional indemnity policies. The effect of the Supreme Court’s approach to the issue of proximate cause in the Test Case could be to encourage insurers to point to modest workmanship issues as being a proximate cause of the loss in an attempt to refuse cover on the basis of the Wayne Tank principle. Whilst that approach would, in our view, be wrong (unless restricted to the narrow type of interdependent concurrent proximate cause of the type considered in Wayne Tank itself), the possibility of insurers seeking to take a Wayne Tank point more often on the basis of the Supreme Court’s approach to proximate cause makes that aspect of the decision “Ugly” for some policyholders, such as Design & Building Contractors with restrictive workmanship exclusions in their professional indemnity policies.

Rob Goodship is a Senior Associate at Fenchurch Law

Fenchurch Law construction

Webinar - Traps for Contractors and their Brokers

Practical issues to be aware of for those dealing with CAR and Contract Works policies, including the correct trigger for damage, when a defect may constitute damage and an overview of the two leading suites of defect exclusion clauses.

Rob Goodship is a Senior Associate at Fenchurch Law