Construction - YJL Ltd v Jacobs One Ltd

Case Alert - [2017] EWHC 2625 (TCC)

Judge confirms irrelevance of prior year policies when construing an insurance policy

The claimant agreed that the defendant could enter into construction contracts in the name of the claimant. After settling claims which were brought by customers of the defendant in 2013, the claimant sought an indemnity from the defendant. The judge found, on the facts, that the defendant had not agreed to indemnify the claimant. A further issue (which the judge did not need to decide) was whether the defendant was a co-insured under a professional indemnity policy taken out by the claimant.

For policies taken out by the claimant between 2002 and 2011, the definition of the insured included associated companies, and the defendant was named as an associated company. However, for the policy year in question, 2012-13, the defendant had not been covered as an associated company and the judge found that, on the facts, the defendant was no longer an associated company at that point.

She went on to say that "the evidence of what happened in prior years does not aid the construction of the contract between the claimant and a different broker and insurer. The contract has to be construed against the background for the relevant year and not by reference to what happened prior to the entry into of that policy". Nor was she prepared to imply a term into the oral agreement between the parties that the claimant would maintain professional indemnity insurance for both parties for such period as any potential liability could arise in respect of construction works carried out by the defendant: "The fact that the defendant was named as a co-insured for the year 2002 and for a number of years thereafter may lead to an inference that the parties would have agreed it if it had been suggested to them...is necessary but not sufficient basis...