Cornhill v. Stamp Felt

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DMC/INS/03/02
Cornhill Insurance Plc v. D E Stamp Felt Roofing Contractors Ltd.
English Court of Appeal: Pill and Longmore LJJ, Sir Denis Henry: March 2002
Graham Eklund, instructed by Beachcroft, for Cornhill
David Platt, instructed by Layton’s (Bristol), for Stamp
INSURANCE: PUBLIC LIABILITY INSURANCE POLICIES: FLAT ROOFING BUSINESS: FIRE:
POLICY CONDITIONS: BREACH OF CONDITIONS: REFUSAL TO INDEMNIFY: ARRANGING FOR PRECAUTIONS TO BE TAKEN: UNDERTAKING THAT PRECAUTIONS HAD BEEN TAKEN: ABSOLUTE OBLIGATIONS
Summary:
Where a public liability insurance policy contained a condition precedent that the insured ‘shall have arranged for … precautions to be taken whenever carrying out any work involving the application of heat", that provision did not mean that the insured had undertaken – as a pre-requisite to cover under the policy - that those precautions would be complied with in every case.

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Facts
Stamp were roofing contractors that had been engaged to lay a felt roof on a new-build extension to a primary school in Bristol. Laying the roof involved ‘hot work’, in that the first layer of felt had to be bonded to the under-lying plywood deck. This was done by melting the tar in the roofing felt with a propane blowtorch. During the course of the roofing work, a fire broke out and the school was substantially damaged. The school claimed damages from Stamp in the amount of £1.2 million and Stamp in turn claimed indemnity from its public liability insurers, Cornhill Insurance.

The insurance policy contained the following clause, Condition 3:
"It is a condition precedent to any liability of [the insurers] that the insured shall have arranged for the following precautions to be taken whenever carrying out any work involving the application of heat".
There then followed a number of sub-clauses requiring the insured a) to make a thorough investigation of the vicinity of the work to determine whether there was any combustible material in danger of ignition, b) to remove combustible material away from the immediate vicinity of the work, c) to cover and protect material which could not be removed and d) to make frequent inspections of the site for one hour after completion of each period of hot work.

The insurers denied liability under the policy on the grounds that Stamp had not complied with these conditions. At first instance, the judge found for the insurers, holding that, although Stamp had complied with condition a), it had failed to comply with conditions c) and d). Stamp appealed against hat decision.

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Judgment
The leading judgment was give by Longmore LJ.

The court overruled the judgment at first instance in favour of Cornhill. At first instance the judge had treated the conditions set out in Condition 3 as precautions that Stamp was required to take before recovery was made. That was not what Condition 3 stated; it required Stamp to have arranged for the precautions to be taken; it did not require that Stamp promised that they had been taken. "Arranging for precautions to be taken is different as a matter of language from promising that they will be taken. The first is a requirement for the setting up of a system; the second is a guarantee that the system will work. Those are two very different things." This was important, since the policy was intended to cover Stamp for liability to third parties in negligence, whether the negligence had been that or Stamp or its vicarious liability for the negligence of its directors and employees. The court found that it would be "entirely reasonable for insurers to require an arrangement that precautions be taken, [but] it would be much less reasonable for insurers to require a guarantee that the arrangements should invariably be complied with, because such failure is likely to be the result of an employee’s negligence for which cover is required. This policy does not, on the face of it, bear that unreasonable construction." Had that been the intention, the introductory wording of Condition 3 would have been unnecessary.

In summary, Condition 3 did not impose an absolute obligation upon Stamp to ensure each precaution was at all times effected and performed strictly. It left scope for acts and omissions without releasing Cornhill from liability under the policy.

The court also examined the question whether the conditions had in fact been complied with, since the case had been argued at first instance on that basis. The court determined that, upon the true construction of the provisions in question, Stamp were not in breach of either c) or d) above. The decision at first instance that Stamp had complied with a) was upheld.

Judgment was accordingly given for Stamp.

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