Contractors’ combined liability insurance policies typically provide both public liability and product liability cover. In Aspen v Adana
(2015), the Court of Appeal provided useful commentary on the interrelationship between the two where a contractor creates an object on site which is subsequently at the centre of a third party loss.
Adana were contracted to construct a concrete crane base (designed by engineers) which was to sit on top of four piles (constructed by others). As part of its works Adana drilled holes and inserted dowel rods into the four piles. The dowels were to form the connection between the piles and the crane base. The crane base was then formed by pouring concrete into reinforced steel cages placed on top of the piles.
After Adana left site the crane placed on top of the base collapsed causing significant personal injury to the driver and extensive damage to a nearby building.
Adana notified the incident to its insurer, Aspen, who adopted the position that what Adana had constructed ie, the crane base, was a "Product" as defined by its policy (any product or goods manufactured, constructed, installed, altered, repaired, serviced, processed, treated, sold, leased, supplied or distributed…). Aspen contended that an exclusion in the public liability section (excluding damage..."caused by any Product") would operate and any claim under the policy would fall within the product liability section. Aspen further argued that any liability of Adana resulting from the crane’s collapse arose as a result of that Product’s failure to fulfil its function which was excluded from cover.
Aspen issued proceedings in the Commercial Court seeking a declaration to that effect.
The Court of Appeal upheld the Commercial Court’s finding that what Adana had created, namely the crane base, was not a "Product" as defined by the policy. The definition of "Product" still required it to be a product (little "p") in the “conventional or natural sense of the word”. The "hallmark" of a product would be something that in its original state was tangible and moveable and not something which only came into existence to form part of the land on which it was built.
The Court of Appeal went on to find that although the dowels which Adana had supplied as part of its works were "Products" any liability of Adana to third parties (the expert evidence before the court suggested the cause was design failings by others) did not arise as a result of that "Product" failing to fulfil its function. The expert evidence found that the dowels had not failed, but had pulled out of the piles intact. The only liability that Adana might have arose as a result of some error in the dowels’ installation.
In other words, where the Product itself is fine, and only "failed" as a result of defective installation, the public liability section of the policy would apply to the contractor’s claim for an indemnity.
A contractor will inevitably create something, an object, as part of its work. This decision affirms that what it creates will not be construed to be a "Product" for policy purposes (at least on the basis of this wording) if it would not be considered a product in the ordinary sense of the word. Furthermore this decision confirms that if a Product is installed incorrectly, that should not trigger the product liability section of a combined cover policy, where the public liability section is intended to cover defective workmanship.