Civil Engineering March 2022 | Vol 30 No 2

64 March 2022 Civil Engineering T he booklet, titled ENSafrica Construction ENSurance: recent influential court decisions and what they may mean for your business references judicial decisions made in 2019 and 2020. Although many of these deci- sions originate in the United Kingdom, Australia and Canada, they are worth paying attention to as they may prove to be influential on future decisions made by South African courts. We have selected five topics and provide our expert analysis and commentary in respect of each one. While this is not intended to be a reference work, we do hope that it will be useful to those in the construction and insurance industries. The five topics and the judicial decisions to which they relate serve to demonstrate the significant interconnectedness between the fields of construction and insurance law. The selected topics are: 1. The status of interim payment certificates on cancellation of a con- struction contract and implications for construction guarantees and guarantee insurers. 2. Coverage implications for insurers in a construction contract in circum- stances where the construction all risks insurance policy and the reinsur- ance policy are not back-to-back. 3. Contractual liability exclusion clauses in liability insurance cover, including construction all risks covers. 4. The rectification of an on-demand construction performance guarantee issued by an insurer and the doctrine of strict compliance. 5. The controversial defective workman- ship exclusion in construction all risks insurance policies. In this article we unpack the second of the topics listed above. TOPIC TWO UNPACKED Coverage implications for insurers in circumstances where the construction all risks insurance policy and the rein- surance policy are not back-to-back In a 2019 decision of the English High Court of Justice in the matter of Munich Re Capital Ltd v Ascot Corporate Name Ltd , the court had to consider the proper construction of a Facultative Excess of Loss Reinsurance Policy, more particu- larly the “maintenance period” provision in the reinsurance policy. The principal insurance policy was an off-shore Construction All Risks Policy, relative to a very substantial offshore construction project in the Gulf of Mexico. The rein- surance policy incorporated all the terms and conditions of the insurance policy. The intention was that it would operate “back-to-back” with the insurance policy. The insurance and reinsurance poli- cies covered physical loss and/or physical damage caused to the project works oc- curring during the project period. In terms of both policies, the project period was date defined and the maintenance period extended cover for a period not exceeding a further 12 months after the expiry of the project period, but only in respect of physical loss and/or physical damage arising from a cause occurring prior to the commencement of the maintenance period. The maintenance period clause read as follows: “Coverage shall continue during the maintenance period(s) (subject to the terms, conditions and exclusions in the wording), up to a period of 12 months after expiry of the project period”. The insurer had agreed to extend the project period on a number of occasions due to delays in the completion of the construction of the project. As a result of an error and/or oversight on the part of the insurer and/or its reinsurance broker, the reinsurer was not notified of the ex- tensions. Accordingly, the project period under the reinsurance policy was not Construc t i on and i nsurance law Rob Scott Insurance Practice Group | Executive ENSafrica rscott@ENSafrica.com Zara Sher Insurance Practice Group | Senior Associate ENSafrica zsher@ENSafrica.com Zoë Wein Associate ENSafrica zwein@ensafrica.com Recent influential court decisions and what they may mean for your business – Part 2 ENSafrica has released a booklet on construction insurance topics with reference to judicial decisions made in 2019 and 2020. This article forms part 2 of a series that unpacks the various topics covered in the booklet. The court refused to apply a literal interpretation of the wording in relation to the reinsurance policy, as such an interpretation would not take into account the commercial reality