Two insurances: Which one pays?

Insurance provisions in a construction contract can be complex and confusing. There is public liability insurance, employer’s liability insurance, professional indemnity insurance and project specific insurance. 

The project specific insurance may be taken out by the employer or the contractor. It may also have to be in the joint names of all parties and it will cover only certain risks.

In a recent case, there was both a joint name project insurance policy and a term under a subcontract that the subcontractor would maintain its own insurance. Fire damage occurred during building works to a school in London. The project insurers paid for the claim but then sought to claim against the subcontractor who had been responsible for the fire. They sought to recover from the subcontractor’s insurers.

The subcontractor argued that it was a named third party under the project insurance and therefore it could not be sued. It was the intention that the project insurance cover subcontractors. However, the subcontract had an express insurance requirement that the subcontractor take out insurance for the same risk. It was held in the Technology and Construction Court that the subcontractor could not rely on the project insurance policy and that their own insurers were liable for the loss.

This means that where there is project insurance which covers subcontractors, subcontractors must make sure that their contracts do not require them also to take out the same insurance. If there is such a clause then it will be their policy that pays out and not the project insurance, even if this was not the intention.

If you would like to discuss this issue further or have any other questions on this, please do not hesitate to contact me on 01245 453 813 or alternatively you can email me at

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.