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Tackling co-insurance issues or a ‘try’ on? FM Conway v The Rugby Football Union: the extent to which contractors and sub-contractors are covered under construction all risk policies

July 2023
Nathan Modell and Nicholas Smith

In a fairly rare case concerning a project construction all risk insurance policy (CAR Policy) reaching the Court of Appeal, in FM Conway Limited v The Rugby Football Union, Royal & Sun Alliance Insurance PLC, Clark Smith Partnership Limited [2023] EWCA Civ 418 the Court of Appeal has upheld a high court decision which reminds contractors and sub-contractors that in order to rely on insurance cover under a CAR Policy the parties must ensure that the contractual documents are clear and entitle them to the same level of cover on offer under a CAR Policy.


In advance of the 2015 Rugby World Cup, the Rugby Football Union (RFU) undertook significant works to upgrade the infrastructure of Twickenham stadium in 2012. As part of these works, RFU engaged Clark Smith to design buried ductwork for the transit of power cables. FM Conway (Conway) were engaged under an amended JCT Standard Building Contract without Quantities 2011 (the JCT Contract) to install the buried ductwork.

Insurance Option C under the JCT Contract provided for the RFU to take out and maintain a Joint Names Policy in respect of damage. The following provision was notable:

C2. “[The RFU] shall take out and maintain a Joint Names Policy for All Risks insurance with

cover no less than that specified in clause 6.8 for the full reinstatement value of the Works

or (where applicable) Sections (plus the percentage, if any, stated in the Contract

Particulars to cover professional fees) and (subject to clause 2.36) shall maintain such Joint

Names Policy up to and including the date of issue of the Practical Completion Certificate

or, if earlier, the date of termination of [Conway’s] employment (whether or not the

validity of that termination is contested).”

Clause 6.8 of the JCT Contract required that the “Joint Names Policy” which the RFU was required to obtain was expressly stated to be on a composite basis, i.e. in this instance separate contracts of insurance which protected the different rights and interests of the insured parties.  Whereas the RFU was a named party, the CAR Policy included the following wording “all other contractors and/or sub-contractors of any tier … each for their respective rights and interests”. As such, cover could differ between the RFU and Conway. Furthermore, Clause 6.8 of the JCT Contract expressly excluded the cost necessary to repair, replace or rectify any damage caused by defective design and/or workmanship.

The RFU alleged that there were defects in the design and installation of the buried ductwork which caused damage to the cables when they were pulled through the buried ductwork. The RFU said that this resulted in it incurring costs of £4.4 million; £3.3 million to replace the damaged cables and £1.1 million to rectify the defects in the buried ductwork.

Prior to Clark Smith or Conway being engaged, the RFU entered a CAR Policy, where RSA was the principal underwriter. Following the remedial works, the RFU was indemnified by RSA under the policy in respect of the £3.3 million to repair the damaged cables.

The RFU were a named party under the CAR Policy. Conway were not. However, Conway was insured to some extent under the CAR Policy as they were part of a generic category (or tier) of contractor and sub-contractor insureds.  However, they were not insured to same extent at the RFU.

The CAR Policy included a “DE3” defects exclusion clause;

Design Exclusion 3 (DE3) Design, Plan, Specification, Materials or Workmanship  `Consequences’

Damage to and the cost necessary to replace repair or rectify

(a) Property Insured which is in a defective condition due to a defect in design plan specification materials or workmanship of such Property Insured or any part thereof

(b) Property Insured lost or damaged to enable replacement repair or rectification of Property Insured excluded by (a) above.

Exclusion (a) above shall not apply to other Properly Insured which is free of the defective condition but is damaged in consequence thereof.

For the purpose of the Contract of Insurance and not merely this Exclusion the Property Insured shall not be regarded as lost or damaged solely by virtue of the existence of any defect in design plan specification materials or workmanship in the Property Insured or any part thereof.”

The result being that the CAR Policy did not indemnify the cost necessary to repair property which was in a defective condition due to a defect in design or workmanship; meaning that the defective buried ductwork was not an indemnified loss.

However, Clause 6.8 of the JCT Contract required insurance cover for Conway which excluded any damage caused by defective design and/or workmanship and was therefore different to cover provided under the CAR Policy (where the DE3 exclusion does not apply to property insured which is free of the defective condition but is damaged).

Because the Conway were not insured to the same extent as the RFU for damage caused by defective design or workmanship, Conway was not able to take advantage of the co-insurer defence and RSA sought a subrogated recovery of the £3.3 million in respect of the repair for the damaged cables from Conway and Clark Smith due to its alleged defective design and workmanship in respect of the defective ductwork.

The co-insured defence

Conway subsequently issued proceedings seeking a declaration that it was a co-insured with the RFU under the CAR Policy. The co-insured defence is the principle that a co-insured under a policy is also protected by its terms and cannot therefore be sued for the same loss (as per the Supreme Court decision of Gard Marine & Energy Limited (Appellant) v China National Chartering Co Ltd and another (Respondents) [2017] UKSC 35).

If the RFU claimed that the CAR Policy was triggered to cover the loss, it would also have to accept that it covered Conway’s liability. It was Conway’s case, therefore, that the RFU could not make a claim against it for losses covered by the CAR Policy and insurers could not bring a subrogated claim.

A trial was ordered to determine a preliminary issue of whether the £3.3 million in respect of the repair of the damaged cables was irrecoverable, because RSA could not exercise subrogation rights, and/or because on a proper interpretation of the CAR Policy and/or the CAR Policy and the JCT Contract the RFU and/or RSA were not entitled to claim the insured losses from Conway.

First instance Judgment

Mr Justice Eyre decided that in order to determine the existence and extent of the cover it was necessary to consider the underlying contract between Conway and the RFU. The Judge therefore undertook an assessment of the evidence of dealings between the RFU and Conway, from the sending of the Letter of Intent to conclusion of the JCT Contract.

The Judge heard witness evidence from a project manager at RLF3PM LLP (RLF3PM), who were engaged by the RFU, that it was intended that comprehensive ground insurance would be obtained which would be more extensive than that envisaged in the standard terms of the JCT Contract. The intention had been for there to be comprehensive insurance cover creating a fund as the sole recourse for any physical loss or damage during the works.

Under Insurance Option C of the JCT contract, the RFU was obliged to procure and maintain insurance which provided Conway with cover in respect of the full reinstatement value of the Works or (where applicable) Sections up to and including the date of issue of the Practical Completion Certificate.  However, insurance in respect of the cost of rectifying damage caused by Conway’s own defective works was excluded.

The Judge decided that if the parties had contracted on the basis that the CAR Policy was to be the sole avenue for redress, then further amendments to the standard JCT Contract could have (and should have) been made so as to provide for that in clear and express terms. That was not done.

Instead, the Judge found that the CAR Policy provided cover contemplated by Option C in the JCT contract. Conway was therefore not a co-insured in respect of the losses which the RFU incurred from damage to the cables caused by the defects in the buried ductwork. Therefore, Conway could not benefit from the waiver of subrogation clause to prevent a claim by RSA because it was not a co-insured in respect of the that loss.

The Judge also considered the alternative ‘standing offer’ analysis set out in Haberdashers’ Aske’s Federation Trust & Anr v Lakehouse Contracts Limited & Anr [2018] EWHC 558 (TCC) (Haberdashers’). In Haberdashers’ the Court considered for the first how a sub-contractor enjoys the benefit of project insurance. Lakehouse Contracts Ltd (Lakehouse) was appointed the main contractor for the construction works. Project insurance was obtained covering a list of insureds including Lakehouse and its sub-contractors. Lakehouse engaged Cambridge Polymer Roofing Ltd (CPR) to carry out roofing works. CPR’s subcontract included an express terms that CPR would obtain its own insurance cover. A fire occurred and caused extensive damage to the existing buildings and works. Lakehouse admitted liability and brought an additional claim against CPR. CPR raised the co-insurance defence and argued that insurers could not bring a claim against them. The Court considered whether CPR were included within the project insurance. The Court considered the agency principle, acceptance by conduct, and a “standing offer” analysis. The standing offer principle was that insurers had made a standing offer to insure persons who subsequently became sub-contractors, and that on execution of the sub-contract that would lead to an implied term in the sub-contract between the contractor and sub-contractor. Fraser J found in favour of the insurers. He gave precedence to the express terms of the sub-contract and CPR’s intention to obtain its own insurance policy in respect of works. CPR were therefore not entitled to the protection of the project insurance.

Court of Appeal decision

Conway appealed the decision on five grounds:

  1. The Judge had not applied the correct test for ascertaining authority and intention of the parties;
  2. The Judge erred in undertaking his investigation by reference to the building contract when that contract was entered into three months after the CAR Policy;
  3. Because Conway were not an undisclosed principal but identified as a co-insured at the time the CAR Policy was incepted, any issue as to intention was irrelevant and all that mattered was the nature and scope of the RFU’s authority;
  4. As an alternative to (3), that if Conway was not identified in the CAR Policy, then it participated as an undisclosed principal; and
  5. Because of the waiver of subrogation clause in the CAR Policy, then there could be no subrogated claim against Conway even if it was not co-insured with the RFU in respect of the relevant loss.

The Judges found against the appellate on all five grounds. In particular, on the first ground, in discussion on the correct test for ascertaining the necessary authority and intention of the parties, Lord Justice Coulson considered the pre-contract discussion and the evidence of the project manager from RLF3PM for Conway, together with the contractual documents. In rejecting Conway’s arguments, Lord Justice Coulson was clear that “Whatever their understanding had been, it was not ultimately reflected in either the Policy or the building contract.”


This case is a key reminder for parties to construction contracts where there is (or intended to be) project or CAR insurance policy that the intentions of the parties must be reflected in clear and express terms in the contractual terms.

This is especially relevant, as in Haberdashers’, when dealing with sub-contractors/consultants or where standard form contracts are used which may not have been amended to reflect the terms of any project/CAR policy.

Relying on pre-contract discussions, correspondence, or letters of intent, may not be sufficient if the resulting contract wording is not clear and express. Standard form, or bespoke, contractual documents must be amended accurately to reflect the true intention of the parties (and terms of any policies intended to provide indemnities in respect of physical loss or damage).

The Court of Appeal confirmed Mr Justice Eyre’s finding that, in principle, compelling evidence to counter the natural reading of the contract could be relied on to show authority and intent. However, Lord Justice Coulson made it clear that assessment of authority and intent “will start (and possibly finish) with the underlying contractual arrangements”.

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