How Effective is Your Environmental Insurance
07 February 2008
How Effective is Your Environmental Insurance
In Tesco Stores -v- Constable 2007 Tesco sought to recover losses from its insurers in respect of a collapse of a railway tunnel at Gerrards Cross. The claim against the insurers failed.
The background to the case is that Tesco was constructing a new supermarket over a railway tunnel in Gerrards Cross which was not able to support the works being carried on above. Accordingly the collapse meant there was significant damage to the tunnel, the railway lines and the signalling equipment which caused a 50 day loss of service for the train operator.
The railway operator Chiltern claimed against Tesco under a contractual deed of indemnity for its losses. Tesco turned to its public liability insurers which disclaimed cover on the basis that there was a clause in the insurance policy which restricted cover to tortious matters such as damage to property, obstruction, trespass, nuisance or any like cause. The insurers stated that contractual liability under the deed of indemnity was not covered.
The court agreed that the policy should be interpreted narrowly and stated that the intention of a public liability policy was to cover claims for personal injury or damage to property. It was the task of a private liability policy (which Tesco did not have) to cover contractual obligations that might lead to economic loss.
Some interesting legal principles were at stake in this case. For example there is a principle that economic loss is not recoverable in tort. Therefore because the railway operator Chiltern did not own the infrastructure which was owned by Network Rail their claim was for economic loss. Accordingly Chiltern preferred to make their claim under the contractual indemnity because economic loss would be recoverable.
Had Tesco anticipated the legal implications of the collapse of the tunnel in advance of it happening no doubt Tesco would have taken out a specific insurance policy to cover contractual liabilities because then they would have been insured against economic losses sustained by someone like Chiltern. Obviously an additional premium would have been payable at substantial cost but Tesco then would have been able to pass liability on to the insurers in a case such as this.
The advice to clients engaged in major projects requiring the use or support of other people’s infrastructure or land and where indemnities are consequently provided should be to commission the appropriate additional insurance cover to cater for these particular liabilities.
Latest Events
- July 2008
Forthcoming Events
