BLG Construction and Property Professionals' Briefing - Notification Under The Spotlight

Professionals engaged in the construction and property sectors

will know that the landscape has been changing over the course of

the last 18 months. The economic climate is deteriorating and there

has already been a significant downturn in the property development

sector. This will bring greater pressure on funding and profit

margins for larger construction projects and is likely to increase

the risks in relation to the solvency of suppliers and

sub-contractors.

We expect these factors will exacerbate the number of claims and

disputes within the industry, which in turn will likely lead to an

increase in the incidence of construction and property

professionals turning to their indemnity insurance for

protection.

On renewal

Laker Vent Engineering Ltd v Templeton Insurance Company

Ltd (2008)

The insured, Laker Vent, notified its insurers, Templeton, of a

claim which took the form of an arbitration that had arisen under a

construction contract between Laker Vent and a third party

contractor. Laker Vent sought an indemnity from Templeton in

respect of its legal costs arising out of the arbitration.

Templeton rejected the claim on the grounds that Laker Vent had

knowingly failed to disclose a material circumstance (the

escalation of the dispute) prior to renewal of the policy, and said

that this failure meant that Laker Vent had not adhered to the

contractual notification procedure under the policy, which entitled

Templeton to decline cover.

The High Court rejected Templeton's arguments and found in

Laker Vent's favour. Laker Vent was entitled to insurance cover

since, at the time of renewal, it owed Templeton the usual duty of

disclosure as codified by statute and imposed by the general law.

The fundamental question was whether the various matters of which

Laker Vent was aware before renewal amounted to circumstances which

were so material that they would have affected the judgment of a

reasonable insurer in fixing the premium or determining whether he

would take the risk. The Court considered that, at the point of

renewal, Laker Vent's relationship with the third party

contractor had not deteriorated sufficiently to qualify as a

material circumstance.

In a note that will strike a chord with many construction and

property professionals, the Court observed that it was inevitable

for complex construction contracts to be vulnerable to a variety of

disputes and that an insurer should, therefore, be aware of the

general risks that arise from such...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT