Contractors Beware: Defects Liability And Project Insurance Coverage

Energy firm SSE Generation has been awarded in excess of £100m damages on appeal over a tunnel collapse nearly ten years ago at the Glendoe hydroelectric power scheme in Scotland (SSE Generation v Hochtief Solutions  [2018] CSIH 26). The Inner House, Court of Session, decided by a majority of 2:1 that the contractor was liable for costs of repair due to breach of the requirement that erodible rock encountered in the tunnel be shotcreted if not otherwise protected, despite having exercised reasonable skill and care, as defects were in existence at take-over by the employer. The contractor could not rely on a contractual limitation of liability for design defects as the damage was caused by implementation of the design (i.e. workmanship).