Public Liability Insurance: Cover For Contractual Liabilities

In its judgment in the case of Tesco v. Constable & Others, handed down on 14 September 2007, the High Court has considered the availability of cover for contractual liabilities under the public liability section of a project policy. The judge took a very narrow view of a Contractual Liability Extension, effectively restricting cover to losses of a tortious type.

Tesco’s claim for indemnity arose out of the collapse of a tunnel outside Gerrard’s Cross Station, which led to the line through Gerrard’s Cross being closed for 51 days. Chiltern Railways, who operate on the line through Gerrard’s Cross, made a claim against Tesco under a contractual Deed of Covenant. The claim was settled in June 2007 and the settlement included amounts for lost revenue suffered as a consequence of the tunnel collapse after the line had re-opened.