Some have expressed pure outrage at the recent decision of the House of Lords CRS v Taylor Young Partnership & Others (Judgement 25.4.02). The employer sustained losses in a fire.The case concerned the design professional's attempts to claim a contribution towards compensating the employer, from the construction team, whom they alleged were partly responsible for the fire.
At each stage of the judicial process, the courts consistently held that the operation of the provisions of the JCT standard form of contract, the joint names insurance and the Civil Liability (Contribution) Act 1978 operated to preclude such a claim. On a superficial reading of their Lordships' speeches, one would expect this outrage to have been expressed by the design professionals, and others like them, who are now left to face the employer's claim alone and are prevented from sharing their liability with other blameworthy parties.However, a closer reading of the judgment reveals that the real fury is to be expected, not from the professionals themselves, but from their professional indemnity insurers.
At the heart of the design professional's claim in the CRS case was what was described by one of the law lords as their 'jury point'. Bearing in mind that juries are influenced by factors wholly unconnected with the operation of the law, the professionals simply claimed that it would be unfair if they were left to pick up 100 per cent of the bill for fire damage if they were only, for example, 10 per cent to blame for the fire.They endeavoured to illustrate the profound injustice of the contracting team colluding with the employer to exclude the ordinary rules of liability for fire, by means of their own private contract, which provided for an insurance policy that would foot the fire damage bill. The ultimate injustice was the fact that this policy covered the contractor and the employer, but not the professionals.
The combination of this private arrangement and the general principles of insurance law resulted in the joint names insurers being able to claim back their outlay from the professionals but prevented the professionals from claiming a contribution towards the damage from the contractors. On the face of it, this argument has something going for it. But if you step back from the heat of the debate for a moment and consider the cold commercial reality of the case, you get a different perspective.
First, the professionals were not left to pick up the bill for fire damage. Their professional indemnity insurers were. So the professionals were insured against fire damage, just as the employer and contractor were.
Second, there is no common law right to claim a contribution. A contribution claim is a pure creature of statute. If the provisions of the 1978 Act are seen to be unfair, the position has been made a good deal fairer than it was before the introduction of the present legislation. As the Court of Appeal pointed out, if the present rule is harsh, the courts cannot remedy that harshness by inventing a new rule to enable the professionals to recover where there is no liability under the Act.
Third, there is nothing secret about the provisions of the JCT standard form of contract. One might need the assistance of a stiff drink to facilitate an understanding of how the insurance provisions operate, but the JCT is a composite body that includes representatives from most of the design professions, including the RIBA and ACE. Both the professionals and their insurers must be taken to have been well aware of the terms of the main contract.The law lords recognised that, ultimately, the case was a dispute between the professionals' indemnity insurers on one hand and the joint names insurers under the main contract on the other.
As Lord Bingham said: 'The real complaint of the indemnity insurers was their failure to take steps to guard against a contingency which has in fact occurred, a contingency which could in my opinion have been foreseen had the right questions been asked at the right time.' Now can you see why professional indemnity insurers are hopping mad?