Public Liability Insurance: Cover For Contractual Liabilities

In its judgment in the case of Tesco v. Constable & Others, handed down on 14 September 2007, the High Court has considered the availability of cover for contractual liabilities under the public liability section of a project policy. The judge took a very narrow view of a Contractual Liability Extension, effectively restricting cover to losses of a tortious type.

The Facts

Tesco's claim for indemnity arose out of the collapse of a tunnel outside Gerrard's Cross Station, which led to the line through Gerrard's Cross being closed for 51 days. Chiltern Railways, who operate on the line through Gerrard's Cross, made a claim against Tesco under a contractual Deed of Covenant. The claim was settled in June 2007 and the settlement included amounts for lost revenue suffered as a consequence of the tunnel collapse after the line had re-opened.

The Policy

The Insuring clause of the PI section provided that "The Insurers will indemnify the Insured against all sums for which the Insured shall be liable at law for damages in respect of (a) death of or bodily injury to or illness or disease of...