UK: The New British Library Case - The Difference between Insuring and Ensuring

Last Updated: 5 January 1999
The New British Library Case - The Difference between Insuring and Ensuring

Patrick Holmes

As construction projects go, few can have greater notoriety than the new British Library at St. Pancras. We shall probably never know who are the real villains in this sorry tale - it is likely that there were many. However, from the privileged position of knowing virtually nothing about the project at first hand, I should like to nominate the project insurers as candidates for the hall of shame.

I have nothing against insurers generally. As their involvement in the industry grows, I would make few friends by saying that I have. Rather, my complaint arises having read the judgement of the Official Referees Court in the so-called British Library case.[1]

One of the problems which emerged during the course of the project was severe damage to electric cables. There was a claim under the project insurance policy for the cost of putting right the damage and the delay associated with it leading to a total payout by the insurers of £8.4million.

The insured parties under the project policy included the government client, the construction manager and the M&E contractor. The M&E designers (Steensen Varming Mulcahy) were not insured under the policy (although they presumably carry their own professional indemnity insurance). No doubt bruised by having to pay out so much money, the project insurers were anxious to recover something wherever they could. It was they who instigated the action in the British Library case, using their rights of subrogation under the insurance policy to sue in the name of the government client.

SVM were alleged to have breached their obligations to the government client in several respects. They had failed in their design (because it lacked "buildability" and the execution of it could not easily be supervised), they had failed to review their design when problems arose and they had failed in their duties to supervise the execution of the works. The Court found for SVM on all counts and the action failed. Somewhat unusually, SVM were apparently awarded their costs on an indemnity basis for certain aspects of the case, which may indicate an overall lack of sympathy on the part of the judge for the case of the plaintiff insurers.

In the midst of all this there is some interesting law. One aspect revolves around this much used word "supervise". Most design consultants will tell you that they are not responsible for supervising the works. The RIBA architect's appointment does not go any further than saying that the architect will "at intervals appropriate to the stage of construction visit the Works to inspect the progress and quality of the Works and to determine that they are being executed generally in accordance with the Contract Documents". For engineers, the ACE appointment requires the engineer to make "periodic visits to the site as appropriate to the stage of construction to monitor that the Works are being executed generally in accordance with the contract documents and with good engineering practice". Such woolly wording was no doubt prepared with previous case law in mind. Time after time architects have been held liable for failing to identify deficient workmanship and materials during the course of building works.

SVM were not so lucky as to have the ACE wording. The obligation in their appointment was to "make site visits of inspection to ensure that the works are being properly supervised and executed in accordance with the design and specifications and otherwise to safeguard good engineering practice".

As a starting point, this is not too encouraging for the consultant. The obligation is "to ensure that" and that naughty word "supervised" appears. However, SVM were found not to have breached their obligation and this is how:

  • The judge found that making site visits to ensure that the works were executed in accordance with the specification did not amount to SVM being required to guarantee the workmanship of the M&E contractor.
  • As a matter of fact, SVM had warned about the workmanship problems (and at the time, the government client had sided entirely with SVM against the M&E contractor).
  • The workmanship problem arose right at the workface where, it was found, SVM could not be expected to supervise in the way that a site foreman engaged by the M&E contractor probably should.
  • The construction manager itself had obligations to supervise and co-ordinate and SVM's obligations were read in the context of this.
  • SVM's appointment provided that the government client could require SVM to appoint "site supervision staff". The client never exercised this power.

None of this means that architects and other designers are off the hook. They should still consider very carefully the wording of their obligation to inspect, monitor or supervise works. However, it seems that generally they will not be required to guarantee workmanship and materials, which must as a matter of common sense remain the primary responsibility of the contractor.

In the British Library case, the M&E contractor was joined as a third party and no doubt SVM would have sought contribution from it in the event that SVM had been found liable. In the circumstances, it seems that the level of contribution would have been high (could it even be 100%?). Bearing in mind that the contractor was one of the insured parties doesn't this suggest that in bringing the action at all the insurers were wasting everybody's time and money?

The practical lesson for design consultants - do whatever you can to get yourself named as an insured under the project policy. It seems that in the British Library case this would have put SVM in the same (protected) position as the M&E contractor.

[1] Department of National Heritage v. Steensen Varming Mulcahy (1998)

This article was first published in Marcfarlanes' Construction Press March 1999 issue.

Macfarlanes' Construction Press is intended to provide general information about developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.

If you would like further information or specific advice, please contact Tony Blackler.

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