Liability Insurance: Joint Ventures After Buncefield

Parties contemplating joint venture arrangements ("JVs"), contractual or otherwise, may be tempted to exert de facto control over the JV in question, notwithstanding the independence or separate legal character of the latter. They should be wary of doing so. In his recent Judgment¹ as to which party should be vicariously liable for the Terminal Supervisor whose negligence substantially caused the December 2005 explosion at Buncefield oil terminal, Steel J. held that one of the JV partners (Total Downstream UK PLC) rather than the JV itself (Hertfordshire Oil Storage Ltd ) was liable, in negligence, in nuisance and under a rare application of the rule in Rylands v Fletcher².

For liability insurers, the extent to which prospective assureds may control JVs to which they are party, and the resulting liability exposures which they may have for the JV activities, is an important enquiry as to which underwriters ought to satisfy themselves. Is there a potential liability