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Joint names insurance – how far does the protection go?

Joint names insurance is common, but knowing exactly who bears the risk can be complicated.

Joint names construction all-risks insurance is commonplace. Regardless of whether the policy is taken out by the employer or contractor, both are named as insured.

Some subcontractors may also be named or identified on the policy and so benefit from the protection such policies afford. But what exactly is that protection? How far does it extend?

Who bears the risk?

If an event occurs that is covered by the insurance policy – such as fire or flood – but the event was caused by your breach of contract/negligence, does the existence of the joint names policy let you off the hook?

Who bears the risk for costs and losses that are not covered by the insurance due to policy excesses and exclusions?

So far as insured losses are concerned, insurance companies pursue claims using their insured’s name as the insurance policy allows them to do. This is known as a right of subrogation.

“Where a joint names policy exists, the ability of the jointly insured parties to sue one another in relation to uninsured losses depends on what the contract says”

This means that the right to make a claim must exist between the insured and the party being sued before any subrogated right of action can arise. However, in joint names insurance, there will typically be an express waiver of the insurers’ rights of subrogation.

Even where there is no such express waiver, the chances are such a term would be implied into the policy. So even if the insured loss is caused by your negligence, to the extent the policy covers that risk, the loss will lie with the insurers.

Uninsured losses

What about uninsured losses caused by your negligence? Does the existence of a joint names insurance policy of itself prevent an employer from suing you for the uninsured element of their loss? There is some doubt among the authorities about this. 

“Just because your contract provides for joint names insurance to cover certain events, don’t assume that is enough to exclude all liability”

The correct position would appear to be that where a joint names policy exists, the ability of the jointly insured parties to sue one another in relation to uninsured losses depends on what the contract says.

The contract must be clear

If the contract, when properly construed, excludes all liability for a particular class of event, regardless of whether it is caused by your negligence or not, then the employer will have no recourse against you for the uninsured element of their loss.

However, if when properly construed the contract only excludes liability to the extent that recovery is made from the insurers, then an employer will remain able to sue for the uninsured element of their loss.

So just because your contract provides for joint names insurance to cover certain events, don’t assume that is enough to exclude all liability arising from such an event which is caused by your negligence. If that is what is desired, the construction contract will need to make that clear.

Fiona Rossetter is a senior associate at Dundas and Wilson

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