A waiver of subrogation, a limited subcontractor and late facultative notification
Fire on 12 April 2025 destroyed a distribution warehouse at Tilbury insured by Caldecott Foods under a property policy with a £4m limit and a £50,000 excess. Caldecott had engaged Brendon Construction to refurbish an adjoining unit under a JCT minor works contract containing a waiver of subrogation in favour of the employer and a net contribution clause. Hot works by Brendon's electrical subcontractor started the fire. The adjuster agrees a £1.2m indemnity, paid on 30 September 2025. Brendon holds public liability cover of £2m with a £1,000 excess. The property policy is facultatively reinsured under a certificate requiring notification of any loss likely to exceed £250,000 as soon as reasonably practicable and in any event within 30 days; the ceding insurer notified reinsurers on 14 November 2025. Smoke also damaged a neighbouring unit owned by a third party, which has not yet presented a claim.
1. Explain whether the insurer can pursue subrogated recovery and against whom.
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Start with the insured's rights, because the insurer has none better. Subrogation puts the insurer into the insured's shoes, subject to the same defences and contractual limitations. If Caldecott has waived its rights of recovery against Brendon, there is nothing to subrogate against Brendon and the £1.2m is not recoverable from it through the construction contract.
Check the scope of the waiver carefully. Two questions: (a) does the wording cover the employer's property insurer as well as the employer (many waivers extend to 'the Employer and its insurers')? and (b) does the JCT minor works contract pass the waiver down to subcontractors, or does the subcontract incorporate a separate waiver? The electrician is a subcontractor, not a party to the main contract, so unless the waiver expressly extends to subcontractors there may be a direct claim in tort against the electrician.
Then value that claim realistically. The net contribution clause means the subcontractor's liability is limited to its own share of responsibility and is not inflated by others' insolvency; its public liability cover may be limited or may exclude damage to the works themselves. Limitation is six years from April 2025.
Conclusion. Pursue the direct claim against the subcontractor if the waiver does not reach it, and record the reasoning: the waiver is a commercial bargain the insured made, and the insurer takes the contract as it finds it.
2. Reinsurers were notified on 14 November 2025 for an April loss settled in September. Advise on the consequences and the action to take.
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The notification was late. The certificate required notification of any loss likely to exceed £250,000 as soon as reasonably practicable and within 30 days. The fire was 12 April, the loss clearly exceeded the threshold by the time of the adjuster's report, and payment was made on 30 September; reinsurers were told on 14 November. That is a breach of a claims-cooperation/notification obligation.
Assess the consequence, not just the breach.
- Wording: is notification a condition precedent to reinsurance liability, or an obligation sounding in damages? Facultative certificates often make prompt notice a condition precedent, but clear words are needed.
- Prejudice: reinsurers lost the opportunity to investigate the cause, to appoint their own adjuster, to consider salvage, and to influence the settlement with Brendon. Prejudice is the strongest arrow in their quiver, and it is real here because the settlement was agreed before they were told.
- Follow-the-settlements: check whether the certificate contains such a clause. A settlement reached without notice may fall outside it, in which case the reinsurer can challenge quantum.
Action. Notify without prejudice immediately with the full file, explain the delay and the reasons, invite reinsurers to participate in the recovery, and reserve all rights. Also check whether any treaty or excess-of-loss layer responds and whether that layer has its own notification requirement. Record the notification chronology for any future dispute.
3. Advise on the commercial decision to litigate the recovery, including the effect of the insured's excess and the neighbouring unit's damage.
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Quantify before deciding whether to sue. The insurer's outlay is £1.2m, of which £50,000 is the insured's excess and must be restored to the insured before the insurer takes anything. Recovery against the subcontractor is limited by its contractual position, its share of blame under the net contribution clause, and collection risk.
Sequence matters.
- Serve a letter before action to protect the limitation position (damage occurred April 2025, so six years).
- Obtain the fire investigation report and expert apportionment evidence on hot works, supervision and permits.
- Check whether Brendon's public liability cover (£2m, £1,000 excess) responds and whether it excludes damage to property in the insured's care or damage to the contract works.
- Consider whether recovery can run through Brendon if the waiver only covers the employer, or is limited to insured risks.
Commercial judgement. If the recoverable amount after apportionment is £400,000 and legal costs to trial are £150,000 over two years, the net benefit is £250,000 against the risk of an adverse costs order. That may still justify pursuit, but it should be a documented decision, taken with the insured's cooperation and disclosed to reinsurers.
The neighbour's unclaimed damage is a live risk: notify liability underwriters and reserve for a possible claim against Caldecott, and ensure the recovery action does not compromise that position.