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”

Mondaq Advice Centre (MACs)
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.