Lumbermens Mutual Casualty Company v Bovis Lend Lease Ltd

Lumbermens Mutual Casualty Company v Bovis Lend Lease Ltd

A global settlement agreement that does not specifically identify the cost to the insured of discharging an insured liability does not satisfy the requirement of ascertainment of loss under a liability insurance policy. No cause of action for indemnity arises and extrinsic evidence cannot cure this deficiency. The words 'error or omission' in the policy cover non-negligent conduct, but coverage for breach of warranty under the building contract is excluded if the contract was not disclosed as required by the policy.

Parties
Claimant: Lumbermens Mutual Casualty Company; Defendant: Bovis Lend Lease Limited
Jurisdiction
England and Wales
Judgment Date
05 October 2004
Procedural Posture
Commercial/insurance / Trial of Preliminary Issues
Outcome
Preliminary issues determined in favour of the insurers; no indemnity payable under the policy on the facts as pleaded.
Legal Topics
Liability Insurance, Ascertainment of Loss, Construction Contracts, Policy Interpretation, Coverage Disputes
Insurance Law Construction Law Liability Insurance Ascertainment of Loss Construction Contracts Policy Interpretation Coverage Disputes

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Parties

Lumbermens Mutual Casualty Company

Claimant

Bovis Lend Lease Limited

Defendant

Procedural Posture

Commercial/insurance / Trial of Preliminary Issues

Legal Issues

  1. 1 Whether Bovis' liability to a third party was ascertained by judgment, award or settlement for purposes of insurance indemnity
  2. 2 Whether insured loss can be measured subjectively or must be objectively ascertained
  3. 3 Whether policy wording 'neglect error or omission' requires proof of negligence

Ratio Decidendi

A global settlement agreement that does not specifically identify the cost to the insured of discharging an insured liability does not satisfy the requirement of ascertainment of loss under a liability insurance policy. No cause of action for indemnity arises and extrinsic evidence cannot cure this deficiency. The words 'error or omission' in the policy cover non-negligent conduct, but coverage for breach of warranty under the building contract is excluded if the contract was not disclosed as required by the policy.

Court Disposition

Preliminary issues determined in favour of the insurers; no indemnity payable under the policy on the facts as pleaded.

Orders

  • Issues 1(a) and (b) answered No: Bovis' liability was not ascertained by judgment, award or settlement for policy purposes.
  • Issue 2 answered No: Insured loss cannot be measured subjectively or by extrinsic evidence where the settlement does not identify the insured liability.