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Financial Institutions e-briefing: insurance update

    • Financial services


    Insurance update

    Public or Products Liability Cover?

    In Aspen Insurance UK Limited v Adana Construction Limited, in the context of a Combined Contractors’ Liability Policy, an insurer sought to argue that there was a recognised distinction between Public and Product Liability cover to the effect that once work was handed over by an Assured it should be considered a “Product” and therefore any liability subsequently arising should be considered under the Product Liability cover provided by the policy rather than under the Public Liability cover.

    The Court disagreed. The cover available had to be determined by reference to the wording of the policy concerned.


    The Assured, Adana, was contracted to carry out ground works including casting and fixing in place a reinforced concrete “pile cap” on top of piles constructed by another contractor, for the purpose of supporting a crane.  The pile cap was intended to transfer the loads being generated by the crane into the piles, as opposed to bearing or spreading those loads.  The design dictated that Adana should drill 400mm holes into each pile in order to fix four dowels (high-tensile reinforcing bars) into each of the four piles.

    The work carried out by Adana was completed and handed over in mid-December 2008 and a crane was erected on the crane base.  In April 2009 this crane  was removed and replaced by a heavier crane, which subsequently collapsed in July 2009.

    The Health and Safety Executive prosecuted various parties involved, but not Adana.  The cause of the incident was attributed to the failure of the connections between the pile cap and the piles.  None of the dowels were found to have been fixed into their pile to the correct depth of 400mm.

    Subsequently, Adana was joined into an action brought by the injured crane driver.  The allegations against Adana were that the dowels were not installed correctly and/or to the correct depth.

    The Policy

    Adana was insured under a Combined Contractors’ liability policy (“the Policy”), which included both Public Liability and Product Liability cover.  The Public Liability cover was on standard terms covering liability arising out of accidental bodily injury and loss of or damage to tangible property during the period of insurance and excluded cover “against liability arising...caused by any Product”.

    The Product Liability cover was also on standard terms indemnifying Adana for liability arising out of accidental bodily injury and loss of or damage to tangible property during the period of insurance caused by any “Product”.

    Product was widely defined as “any product or goods manufactured, constructed, installed, altered, repaired, serviced, processed, treated, sold, leased, supplied or distributed by or on behalf of the insured from or within Great Britain..... but only after such item had left the insured’s care, custody or control”.

    The Product Liability cover was subject to an exclusion against liability arising in connection with the Product’s failure to fulfil its “intended function”

    The Policy also contained a “Foundation Clause”, which provided, “It is agreed that this Certificate does not indemnify the Assured in respect of loss of or damage to any superstructure arising from the failure of the Assured’s foundation works to perform their intended function”. 

    The Insurer’s Case

    Aspen argued that the pile cap and/or its constituent parts was a Product and therefore any liability arising from it was caused by a Product failing to fulfil its intended function for which it was not liable under the Policy. 

    In support of this argument the insurer relied on expert evidence to the effect that there was a recognised convention in the insurance market that there was a division between Public Liability and Product Liability with the latter cover only kicking in once a contractor’s works had been handed over.  According to Aspen this convention formed part of the relevant factual background against which the Policy should be construed.

    Aspen contended that the Public and Product Liability sections of the Policy were mutually exclusive because of an exclusion in the Public Liability section excluding liability “caused by any Product”.  The definition of Product was very wide and the crane base, and its constituent parts, installed by Adana fell within it.  Therefore a liability arising from the incident was excluded from the Public Liability cover, but, on the face of it, covered by the Product Liability section.  However, any liability established against the Assured would have arisen in connection with the “intended function” of the pile cap and therefore was excluded.

    The insurer’s argument depended on establishing that the pile cap was a Product as defined by the Policy and Aspen relied on various dictionary definitions of “product” taken from the Oxford English Dictionary to support its case.

    The Defendant’s Case

    Adana contended that it was an improper use of language to describe the pile cap as a Product. The Policy was intended to apply to items that had been manufactured, distributed and sold by an Assured.  

    The crane base could not be construed as a Product, but simply part of Adana’s contracted work carried out onsite.  If everything “manufactured”constructed” or “stored” on site were to constitute a Product within the meaning of the Policy the Foundation Clause would serve no purpose because it sought to exclude damage to any superstructure damaged by the Assured’s foundation works and, on Aspen’s interpretation of the Policy, all of those works would have involved producing Products.

    The Decision

    The relevant background to the Policy, as far as the Court was concerned, was that the Policy was in a form devised by the insurer not the insured and was described as covering the full range of liabilities faced by a building contractor. 

    The definition of Product was wide and encompassed two stages: first, the way in which the Product came into a particular state; and, secondly, how it came to leave the Assured’s control.  The starting point in this case was that it concerned a contract for works and materials rather than the supply of a Product.  The pile cap was created by pouring concrete in situ after which it came into existence as a lump of concrete, which was a product in the most literal sense but not in the sense intended by the Policy.  This was not one of Adana’s range of Products: you could not buy it; it was created on the customer’s premises, not at a factory; and it was part of the site works.

    The court observed that the problem, if there was one, appeared to be the depth of the holes in the piles and how they were prepared, which pointed to defective workmanship and classic public liability. Accordingly the court concluded that the pile cap was not a Product and nor did it fail to fulfil its intended function causing loss and damage.


    As the court observed, the insurer seems to have formed the view that once a project had been handed over by an Assured, Public Liability ended and the only cover available was for Product Liability. Aspen submitted expert evidence to support its position, but it was not what was provided for in the Policy and the expert evidence was dismissed by the court as irrelevant.

    Based on the Judgment as reported it is difficult to see what motivated the insurer to proceed as it did.  Its argument did not sit well with what is commonly understood as Product Liability, which is to cover liability arising from a product manufactured and sold by an Assured to other parties, as opposed to covering liability arising from any item created by an Assured in the course of its business that might be said to fall within the dictionary definition of a “product”. 

    Aspen’s attempt to absolve itself of liability under the Policy appears to have done no more than provide those claiming against Adana with ammunition with which to pursue their claim contrary to both Adana’s interests and the interests of its insurer.