John Reilly v National Insurance & Guarantee Corporation Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BURTON,Mr Justice Burton |
| Judgment Date | 11 April 2008 |
| Neutral Citation | [2008] EWHC 722 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2007 FOLIO 440 |
| Date | 11 April 2008 |
[2008] EWHC 722 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Burton
Case No: 2007 FOLIO 440
Mr Nigel Tozzi QC and Mr Alexander Gunning (instructed by Dewey Leboeuf) for the Claimant
Mr Graham Eklund QC (instructed by Keoghs) for the Defendant
Approved Judgment
Hearing dates: 3 April 2008
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Claimant Mr Reilly, trading as J & J Services, is a fire protection engineer who is in the business of installing, at clients' premises, fire detection and protection systems. There was a fire on 12 May 2004 at the premises of one of the Claimant's customers, Print Design and Graphics Ltd (“PDG”). The Claimant had installed three fire extinguishing systems (described as “local application” systems, because the systems were dedicated to extinguishing fires in a particular limited area, or by reference to a particular piece of equipment) for each of three printing presses at PDG's premises, and one of them failed to operate.
PDG sued the Claimant, and the proceedings were compromised for £2m (which was the total of the Claimant's insurance cover), on terms that PDG was entitled to fund and pursue proceedings in the Claimant's name against his insurers: hence the proceedings against the present Defendants, the National Insurance and Guarantee Corporation plc, or NIG. A preliminary issue was ordered by Flaux J on 11 September 2007 to be tried in respect of the Defendant's first defence which, if successful, it is agreed would resolve the proceedings, and render unnecessary any of its other defences, namely:
“Is the Claimant's claim excluded from cover under Tradesmen Insurance Policy number GLA/ 003910953 issued by the Defendant, by the operation of Clause TP34S?”
It is this issue which I have tried.
A set of facts has been helpfully agreed between the parties for the purposes of the preliminary issue hearing. Paragraphs 2 to 6 describe the structure and operation of the three systems, and for the better understanding of my decision I repeat them:
“3. The systems were to be operated either:
a) by the breaking of a glass call point which should in turn have activated an explosive activator fitted to a valve actuator mounted on to the discharge valve in the head of the master cylinder of the relevant system;
b) manually using a mechanical release lever fitted to the master cylinder.
4. The principle of operation of the explosive actuator was to force a piston in the valve actuator on to a pin that protruded from the top of the master cylinder discharge valve, which should in turn have caused the cylinder valve to open and allow the cylinder contents to be discharged into the pipe manifold via a siphon tube inside the cylinder. A “detent” pin in the valve actuator housing was intended to latch the piston, and thus the cylinder valve, in the fully open position.
5. In each supply, the discharge valves of the two “slave” cylinders were connected to the pipe manifold by flexible hosing. The pressure generated in the manifold by the release of liquefied CO2 from the master cylinder was supposed to force pneumatic valve actuators to open the discharge valves of the slave cylinders, which would discharge their contents into the manifold.
6. The contents of the cylinders were supplied to the presses via rigid branched pipework. Nozzles were located at the ends of pipe branches along the length of the presses. The purpose of the nozzles was to distribute CO2 effectively into the semi-enclosed volume of the presses.”
It is assumed for the purposes of the preliminary issue hearing that, following discovery of the fire in press K2, members of PDG's staff activated the relevant system by the breaking of a glass call point: and that the fire in press K2 ought to have been, but was not, extinguished or sufficiently suppressed by the operation of that system. The significant agreement between the parties, to be assumed for the purposes of this hearing only, is as to the cause of the failure of the fixed CO 2 system for press K2, namely that it was either:
“(a) insufficient pressure in the master cylinder in the main CO2 system for press K2, resulting either from the master cylinder having been incorrectly filled or pressured or leakage from the discharge valve of the master cylinder; or
(b) failure of the actuator piston on the cylinder valve of the master cylinder in the main CO2 system for press K2 to latch. As a consequence of this, CO2 escaped through the pilot orifice in the cylinder valve and not the main orifice. This in turn resulted in there being pilot pressure in the manifold but not full pressure and prevented the slave cylinder valves from opening.”
The Tradesmen Policy was incepted on 1 March 2004 for (inter alia) public liability, including product liability. The relevant provisions are:
“ Section 2: Public Liability
The Company will subject to the Indemnity limit [£2m] … indemnify the Insured against:
1. a all sums which the Insured shall become legally liable to pay as damages …
in respect of the Occurrences stated in this section …
Occurrences …
2. Accidental damage to property …
Extensions
K Products Liability
Despite Exclusion 8 of this Section the Company will indemnify the Insured against liability in respect of …
2. accidental damage to property
occurring anywhere within the Territorial Limits during the Period of Insurance and caused by any Products Supplied in or from Great Britain …
Special Conditions
1. Contractual liability
In so far as concerns liability assumed by the Insured under agreement which would not have attached in the absence of such agreement, this Section will only apply if the Company retains sole conduct and control of any claim.
Extension K will not apply to liability assumed by the Insured under agreement other than under any condition or warranty of goods implied by law unless such liability would have attached in the absence of such agreement …
Exclusions
8. Liability arising out of Products Supplied other than:
a food or drink sold or supplied for consumption …
b the disposal of furniture and office equipment … which is no longer required …”
The relevant exclusion clause in issue in these proceedings is in Section 2 of the Schedule:
“TP 34S
This section does not indemnify the Insured in respect of any claim arising out of:
(i) work on or in connection with computers by the Insured or the Insured's Employees
(ii) the failure of any fire or intruder alarm switch gear control panel or machinery to perform its intended function.”
It is the second subclause of TP34S which is, as set out above, the subject of this preliminary issue.
A number of contemporaneous documents has been considered in the course of this hearing. Clearly significant is the NIG Tradesmen Prospectus & Proposal. This contained a summary of cover and the application form for the policy. The policy itself provided that “The proposal and any information supplied by or on behalf of the Insured shall be incorporated in the contract”. There are the following relevant matters contained in the Prospectus & Proposal, under the heading “Summary of Cover”:
(i) “The NIG Tradesmen policy is designed to meet the insurance requirements of smaller contractors in a simple and cost-effective way … The standard cover is Public Liability. This is wide-ranging and provides protection against the common risks faced by most contractors.” This is a passage relied upon by the Claimant as indicating the factual matrix in which the construction of TP34S(ii) should be conducted – i.e. so as to provide “wide –ranging” cover.
(ii) “Our policies are only available through NIG-approved Brokers or Agents and we always recommend that you take advantage of the expert, independent advice they offer.” Insofar as relevant, the Claimant relies upon this as showing that the brokers are agents for the Defendant instead of, or at any rate as well as, for the Claimant.
(iii) There is a list of Eligible Trades, which includes “Alarm Installers” and “Electrical Contractors”. After the list there are the following words: “Other trades may be considered on request. … For some trades, certain hazardous work is excluded or certain cover limitations apply. Your Broker or Agent will supply full details.” The list is of some relevance in relation to the consideration of the Defendant's Underwriting Guide, insofar as it is relevant, to which reference will be made.
(iv) The Proposal Form itself was completed by the Claimant on 26 February 2004. In answer to the request for a description of all work undertaken or proposed for the future the Claimant's reply was: “Install fire protection and detection systems”. It was requested that the inception date for the insurance should be 1 March 2004: and the Schedule subsequently issued for the policy recited the business as being exactly as described by the Claimant—“installation of fire protection and detection systems”—with the inception date of 1 March 2004.
The Underwriting Guide, to which I have referred, was made available by the Defendant to its brokers and was not to be seen, nor was seen, by the Insured. The “Important Notes” at paragraph 5 included an instruction to the broker that they “may not grant cover without prior reference to the company for any risk … not included on the list of Eligible Trades”. The list of Eligible Trades in the Guide did not include Alarm Installers: there were two different kinds of “Electricians” included in the list. By Important Note number 9, under the...
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