Contractor v Insurer 2012
Breach of Contract
The Contractor entered into an insurance contract that provided Construction All Risk insurance for the Works.
Damage occurred to the works, following completion of the construction contract. The cost of rectifying the damage including expert evidence fees; legal fees; consultant fees and interest exceeded £20 million.
The insurer contended that, in the majority of cases, the reinstatement works undertaken to parts of the facility by the Contractor were better, than the original installation. As ‘betterment’ of damage was excluded from the insurance contract, the Contractor was not entitled to be paid for this work. The insurer also submitted that some of the reinstatement works undertaken were unnecessary and more competitive solutions could have the rectified the damage.
By use of their own Exert Evidence the Contractor rebutted the Insurer’s claim that more competitive solutions could have been sought. They further submitted that, although they had reinstated parts of the works to an enhanced specification, the contract entitled them to demolish and rebuild the entire works. It was established by Cap X Solutions Expert evidence that had the Contractor demolished and rebuilt to the original specification, the Insurer would have incurred costs in excess of £25 million.
The Contractor had therefore mitigated the Insurer’s loss in excess of £5 million by undertaking reinstatement of the works to limited parts only. It was further demonstrated that if the Contractor had demolished and rebuilt the facility to the enhanced specification, the cost to the insurer would have reached £30 million, thus mitigating the Insurer’s loss by £10 million.
The Insurer made a without prejudice offer to settle, but negotiations are still ongoing.