Civil Engineering April 2022 | Vol 30 No 3

38 April 2022 Civil Engineering From a literal perspective Q Q With reference to the words “liability or obligation would otherwise have been implied by law”: While an obligation may arise out of a contract entered into, it does not necessarily arise only under contract, but may, in any event, also arise from a pre-existing obligation in law and independent of the contract – for instance a delictual duty of care (in other words a duty “implied by law”). A failure to exercise such duty would give rise to a claim for delictual damages. It would accordingly be illogical to limit coverage under a liability policy simply because the liability, which in any event exists in law, arises by virtue of an agreement. Q Q Liabilities or obligations “assumed” must necessarily be read to exclude liabilities agreed to over and above those imposed by law. From a commercial perspective Q Q Commercial relationships are gov- erned by agreement. Q Q The courts have reasoned that if such exclusion clauses were interpreted to exclude all liability arising in the context of contractual relationships generally, such an interpretation would significantly undermine the purpose of such policies, and be uncommercial. Such contractual ex- clusion clauses may contain wording different to the wording considered in the R&D Drilling case, and different consequences may also arise relative to the type of liability insurance in question. Products and cyber liability covers Q Q Contractual exclusion clauses, as are generally found in products liability and cyber liability covers, may be worded to exclude cover “arising out of a liability based upon any guarantee, warranty, contractual term or liability assumed or accepted by an insured under any contract or agreement, except to the extent that such liability would have attached to the insured in the absence of such contract or agreement”. Q Q The law in relation to the supply of goods and products is generally concerned with the protection of consumers’ interests, and imposes obligations in the nature of guarantees, warranties and often strict liability. Accordingly, in relation to an underlying claim based in contract, where the law imposes strict liability upon a supplier in relation to the supply of defective goods to consumers, the contractual liability exclusion clause in question will not serve to exclude the insurer’s liability under the policy. Construction all risks covers (CAR) Q Q CAR covers provide cover for risks in relation to the insured property (being the contract works) and associated with the work of all participants in the construction contract, the usual participants being the employer, the contractor, sub-contractors, and suppliers (these risks being covered under the contract works section of the policy). The policy is accordingly composite, each participant being an insured party under the policy. Q Q Contractual liability clauses such as the clause under discussion in the R&B Directional Drilling case are also found in the public liability section of a construction works insurance policy. However, the contract exclu- sion clauses in such policies generally provide that the exclusion clause “shall not apply to the insured contract or sub-contract agreements”, or to “any other specific agreement which has been advised to and accepted by the insurer in writing”. This does not necessarily mean that a contractual claim between insured parties will be covered under the liability section. The reason for this is that: Q Q The public liability section of a construction all risks policy is only intended to provide cover for liability to third parties, being members of the public, who are not parties to an underlying construction contract, and then only in respect of contractual liability assumed in respect of risks limited to the physical impact on a third party’s person, property, or property rights. Q Q These risks, as between parties to an underlying construction con- tract (being the insured’s in terms of the policy), are to be dealt with under the contract works section of the policy, or under other policies. Professional liability covers Q Q Such covers on the whole seek to indemnify an insured against a general duty (contractually undertaken) to exercise reasonable skill and care ex- pected of a member of their profession, and not in respect of an undertaking of duties in contract higher than the general duty. Q Q Accordingly, such policies may also contain contractual liability and per- formance guarantee exclusion clauses to exclude claims arising out of, based upon, or attributable to any obligations assumed, that go beyond the duty to use reasonable skill and care (such as an obligation to achieve a fit for purpose standard), and claims relating to guarantees or warranties. This article has sought to demonstrate that in many instances liability policies do afford a measure of contractual liability cover, which would include cover for other liability in law (as would be the case rela- tive to a products liability cover), and that the common misconception that they do not, is misplaced.  The first and second topics in the booklet are outlined in the January/February (Vol.30, No.1) and March (Vol.30, No.2) issues of Civil Engineering respectively. The re- maining topics will be published in future issues of Civil Engineering . To access the full publication visit https://www.ensafrica.com/uploads/newsarticles/0_ensafrica%20 insurance%20newsletter%20final.pdf . This article has sought to demonstrate that inmany instances liability policies do afford ameasure of contractual liability cover, which would include cover for other liability in law (as would be the case relative to a products liability cover), and that the commonmisconception that they do not, is misplaced.