Hong Kong: Contractor´s All Risks Insurance

Last Updated: 15 October 2002

On 25 April, 2002 the House of Lords considered whether an architect or engineer who was sued by his employer for negligently damaging a building could require the main contractor to contribute towards any damages he was ordered to pay. The decision highlights potential risks for the design team if they are not covered under the CAR policy.

The facts

The case in question is Cooperative Retail Services Limited v Taylor Young Partnership and others. Cooperative Retail Services ("CRS") employed Wimpey as the main contractor to build a large new office block. Taylor Young partnership ("TYP") were employed as architects and Hoare Lee & Partners ("HLP") as mechanical and engineering consultants. On 16 March, 1995 a fire occurred at the site while a generator was being commissioned. As a result, completion of the works was substantially delayed and Wimpey had to carry out extensive repairs.

As is common in major construction contracts, the main contract required Wimpey to obtain contractor’s all risk insurance cover against damage to the works caused by fire. Wimpey had obtained a joint names policy which insured CRS, Wimpey and any sub-contractor. However, TYP and HPL were not covered by the policy.

CRS made claims under the all risks policy. The insurers paid CRS and then sued TYP and HLP alleging that their negligence had caused the fire. TYP and HPL attempted to bring Wimpey into the action claiming that they were entitled to payment from Wimpey towards any damages due. Wimpey argued that they had no liability to CRS and, therefore, could have no liability to contribute towards any damages awarded against TYP or HLP.

The law

Before we consider the court’s decision it may be helpful to briefly discuss two relevant points of law. The first is a principle known as subrogation. This states that when an insurer pays a claim, it has the right to take over any other methods which the policyholder may have had for obtaining compensation for the same event. In other words, the insurer can sue the person who caused the insured the loss in the first place. However, an insurer cannot pursue a subrogated claim against someone who is a joint insured covered for the same risk under the same policy as the insured.

The second relevant principle is the law of contribution. Legislation in a number of jurisdictions, including Hong Kong, enables a defendant to recover a contribution towards any civil judgment from any person who is also liable in respect of the same damage, so long as that other person is liable to the same plaintiff.

The decision

It was common ground between the parties that CRS’s insurers, acting through rights of subrogation, could sue TYP or HLP but could not pursue an action directly against Wimpey as they were insured against the same risk and under the same insurance policy as CRS. But, TYP and HLP argued that this did not prevent them from claiming a contribution from Wimpey. Wimpey provided two answers to this argument. The first was that Wimpey’s obligation under the main contract was simply to make good any damage to the Works. As Wimpey had done so, they had a defence to any claim that CRS might bring against them and, therefore, they were not "liable in respect of the same damage" within the meaning of the legislation. Second, Wimpey argued that any claim was barred by the fact that they were insured under the same joint names policy as CRS. The court considered both arguments in detail.

Were Wimpey ever "liable" to CRS in respect of the fire damage?

The court held that the provisions of the main contract provided a complete scheme for dealing with the consequences of the fire. Wimpey had to make good the fire damage but otherwise, the main contract excluded Wimpey’s liability for damage to the works. The court usefully summarised the insurance position, common to many forms of main contract, as follows:

  • CRS was not entitled to deduct anything from the sums payable to Wimpey under the contract as compensation for any loss and damage which CRS suffered due to the fire. This was so even if the fire was caused by Wimpey’s act or omission.
  • Wimpey was obliged to use due diligence to restore the Work that had been damaged by the fire.
  • Wimpey was not entitled to any payment for reinstatement work other than the sum received under the insurance policy.
  • Wimpey was entitled to an extension of time and was not liable to the employer for losses due to any delay caused by the fire.

For these reasons, the court agreed with Wimpey’s first argument and held that Wimpey had no liability to compensate CRS. Therefore, even if Wimpey’s negligence had been an immediate contributory factor to the fire, TYP and HLP had no right to any contribution from Wimpey.

The effect of the joint names policy

Wimpey argued that their joint insurance of the CRS provided them with a second defence to the claim. To allow the claim would be inconsistent with the intentions of the parties as it would effectively deprive them of the benefit of the insurance. The Court agreed and held that it would be nonsensical if parties who were jointly insured under an all risk policy could make claims against one or another in respect of damage to the contract works. That could not possibly be what the parties had intended and, if necessary, the court would imply a term to that effect.


The decision highlights the risks where members of the design team are not insured under the joint names all risk policy obtained for a project. The court accepted that the result could seem unfair. It said "TYP and HLP complain with some force that the conclusions expressed above may lead to a very inequitable result: the bearing of the entire financial consequences of a catastrophe by a party which may have had a very minor responsibility for causing it. This is indeed a possible outcome, and may be the case here. This is the effect of the standard form contract which CRS, Wimpey and [the sub-contractor] made, and it is the standard form of which TYP, HLP and their professional indemnity insurers must [be] taken to have been aware". The court decided that the insurance and repair requirements in the contract swept away the ordinary rules for compensation for negligence. As a result, Wimpey was not obliged to compensate CRS for the same losses as TYP and HLP, and so TYP and HLP were not entitled to a contribution towards any liability from Wimpey. Similar insurance and repair schemes are common in Asia and the decision highlights a real exposure which Asia design teams should address. Given the increasing cost of P.I. cover, we anticipate that most design professionals will hope to address this liability by being named as joint insured under project policies rather than by securing or increasing their own P.I. cover. We wait to see whether main contractors and employers will be willing to allow the design team to be named on those policies.

© Herbert Smith 2002

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions