This case note is based on an Article in the November 2005 Edition of the ‘(Re)insurance Bulletin’, published by the Insurance and Reinsurance teams at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website.

Background
On 3 April 2003, there was a flood at the Margate Theatre, in Kent, UK, caused by the failure of a universal joint in the fire main. The Theatre Trust alleged this was due to breach of contract by a Mr Patrick White trading as A1 Moleing Services, who had carried out work to that part of the main in November 1997. Proceedings were issued in September 2004.

The work had involved cutting out the existing valve which served as a termination point of the fire main and replacing it with a new bleed valve and stop tap.

In February 2005, Mr White brought AXA into the proceedings as a Part 20 defendant (third-party proceedings), on the grounds that it had wrongly declined to accept liability under the policy. The issue of AXA's liability was heard as a preliminary issue.

The public liability section of Mr White's insurance policy covered his business against accidental injury or loss or damage to property "in connection with the business…" A schedule described the insured as "Mr Patrick White t/a Moleing Services" and the business as "groundwork and pipe moleing". This was the same description of the business as had appeared in Mr White's public liability and employer's liability policy for several years (albeit with different insurers).

Plumbing work
AXA's case was that the work Mr White undertook at the theatre did not fall within the activities specified. Groundwork and pipe moleing did not include unnecessary or incidental works, such as the fitting of termination connections of the sort that failed at the theatre. Even if this was not the case, the work undertaken did not form part of a wider package of tunnel boring or pipe laying and so was not covered by the policy. This was plumbing work. Had the business been disclosed as a plumbing business, it would have attracted a higher premium.

Mr White argued that groundwork and pipe moleing can include, not only the boring of the tunnel and the laying of the pipes, but also the installation and connection of the water supply. The work at the theatre was similar to the sort of final termination/connection work that he would frequently carry out as part of his pipe moleing activities.

Judgment
The judge agreed that the work carried out at the theatre was a specialist plumbing activity. But the expert evidence showed that it was similar to the work a pipe moler might do when, having bored the tunnel and laid the pipes for water services, he connected them up with the water main.

But did this fall within the description of the business? In the judge's view, it did. The description in the policy was naturally brief. It would be ridiculous to expect a long and laborious list of every task the insured might perform. It was common sense that it would include work necessary for and incidental to the business.

In addition, the cover provided was in respect of loss or damage to property occurring "in connection with" the business of groundwork and pipe moleing. The phrase "in connection with" was to be construed widely and would include work incidental to the business.

An insurer is presumed to be acquainted with the practice of the trade he insures. AXA was, therefore, deemed to know what work was necessary for and incidental to groundwork and pipe moleing, whether or not it was spelt out in the policy.

AXA complained that this result meant Mr White would get insurance cover for plumbing work when he had not paid the (higher) premium for plumbing. The judge rejected this argument. It did not follow that Mr White's business would be categorised as plumbing. Many specialist contractors carry out work that is capable of falling within a number of different categories. It was up to the insurer to decide which the appropriate one should be.

The judge also dismissed the argument that the work did not fall within the definition because it was not preceded by any boring or pipe laying. It would be extraordinary to have a situation where a particular task might be covered if it was carried out as part of other works but not if it was carried out on its own.

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