The Crane Collapse and the Contractual Web
A contractor is building a distribution centre. It has a construction all-risks (CAR) policy covering the works, with a £250,000 excess and a defect exclusion. The steel frame is erected by a specialist subcontractor using its own 200-tonne crawler crane, hired from a plant-hire company. The crane's load chart is exceeded during a tandem lift; the crane topples, destroying £1.8m of erected steelwork and injuring a site operative. The subcontractor's own liability policy has a £500,000 limit and excludes 'damage to property in the insured's care, custody or control'. The plant-hire company's policy excludes 'damage caused by misuse by the hirer'. The main contractor wants to claim under the CAR policy and recover the excess from the subcontractor.
1. Advise the main contractor on how the loss should be presented across the available policies, identifying the likely coverage gaps.
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The loss has three heads: damage to the works (£1.8m), injury to the operative, and the crane itself (not stated but likely damaged).
CAR policy. The works are insured, so the £1.8m of steelwork falls within the CAR cover. The defect exclusion typically excludes the cost of rectifying the defective part but not damage to other property caused by it. The crane is usually excluded as construction plant, or covered under a separate plant section. The £250,000 excess applies. The CAR insurer may subrogate against the subcontractor.
Subcontractor's liability policy. The care, custody or control exclusion is fatal to a claim for damage to the steelwork, because the subcontractor was erecting it. The exclusion does not apply to the personal injury, which should be covered up to the £500,000 limit - barely adequate for a serious injury.
Plant-hire policy. The misuse exclusion is engaged because the load chart was exceeded, so the plant-hire company's insurer will decline the crane damage and look to the hirer.
Gaps. The steelwork damage sits with the CAR insurer, which will subrogate. The crane damage may be uninsured altogether. The injury sits with the subcontractor's liability insurer, with a low limit. The main contractor should pursue contractual indemnities and check the subcontractor's insurance obligations.
2. How does the contractual allocation of risk between the main contractor and subcontractor affect the outcome?
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The contracts determine who ultimately bears the loss, and the insurance follows the contractual allocation.
A well-drafted subcontract would require the subcontractor to:
- maintain liability insurance at a limit appropriate to the risk (not £500,000 for a crane operation);
- insure the works and plant, or accept responsibility for them;
- indemnify the main contractor for damage caused by its negligence;
- waive subrogation against the main contractor and its insurers.
If the subcontract contains a waiver of subrogation, the CAR insurer cannot pursue the subcontractor for the steelwork, and the loss rests with the CAR policy. If it does not, the CAR insurer pays and subrogates against the subcontractor, which may then face a claim far beyond its £500,000 limit and its care, custody exclusion.
The main contractor's own position depends on whether it is liable to the employer under the main contract for the delay and damage. If so, it needs the CAR policy to respond, and it needs the excess funded. The practical lesson is that insurance limits and exclusions must be matched to the contractual risk allocation before work starts, not after the crane falls.