James Cradick acted on behalf of the administrators of a development company in a multi million pound insurance dispute arising from the collapse of a hotel in London during a complex project to convert the hotel into high end domestic properties.
The development company had appointed a sister company as head contractor on the site whose liability was covered pursuant to the terms of a combined policy with one of the large insurers.
The development project was a complex one from the outset. The building itself was in very poor condition but could not simply be demolished as a result of English Heritage’s insistence on the retention of the facades. The project was also being undertaken against the backdrop of the economic collapse of 2008. The condition of the building coupled with the partial collapse caused delay and issues in relation to the funding position which in turn forced the developers into administration. The sister company also entered administration shortly afterwards.
The administrators pursued the insurers of the head contractor through the Third Parties (Rights Against Insurers) Act 1930 which applies where a person or company has taken out liability insurance.
Normally, if an insured becomes liable to another person (a ‘third party’) they would be able to sue the insured and that liability would be covered by the insurer. However, at common law, if the insured becomes insolvent, the third party has to line up with other creditors in the hope of recovering their losses from the insured’s estate (invariably meaning that nothing would be recovered).
The 1930 Act seeks to preserve the benefit of insurance coverage for third party claimants by transferring the insolvent insured’s rights under the policy straight to the third party, enabling them to proceed directly against the insurer for damages that would otherwise have been payable under the policy. This means any pay-out under the policy is made directly by insurers to a third party with a valid claim.
Working closely with various expert building surveyors, valuers, architects, funders and senior Counsel a compelling case was put to the head contractors insurers which, following various meetings and negotiations, convinced them to put forward a significant sum under the policy by way of settlement.