Back to all cases

Court of Appeal considers WELCAR wording and the construction of composite policies

10th May 2024

The Court of Appeal has handed down judgment in Technip Saudi Arabia Limited v The Mediterranean & Gulf Insurance and Reinsurance Co. [2024] EWCA Civ 481, dismissing an appeal against a decision of Jacobs J ([2023] EWHC 1859 (Comm)) in which he had found that the claim brought against MedGulf failed by reason of an applicable policy exclusion.

The appellant, Technip, was the main contractor for works in a major oil and gas field offshore Saudi Arabia. In 2015, a vessel chartered by Technip allided with and caused damage to a platform in the field. Technip made a claim in respect of its liability for that damage under a policy of offshore construction all risks insurance on the WELCAR form, which named both Technip and the field operator as Principal Insureds.

At first instance, Jacobs J held that Technip’s claim was excluded by the Existing Property Endorsement. The Endorsement, which is commonly incorporated into the Section II liability cover in WELCAR policies, excludes cover in respect of property owned by “the Principal Assured”. Jacobs J held that, because the platform was owned by the field operator, it was property owned by “the Principal Assured” for the purposes of the Endorsement.

On appeal, Technip argued that the reference in the Existing Property Endorsement to property owned by “the Principal Assured” was limited to the particular Principal Insured claiming under the policy, i.e. Technip, such that the exclusion did not apply (because the damaged platform was not owned by Technip, but by another Principal Insured). This interpretation was said to follow both from the words of the Endorsement and from the composite nature of the policy.

The Court of Appeal dismissed the appeal. Sir Geoffrey Vos MR, with whom Lewison and Arnold LJJ agreed, held that the judge’s construction accorded with the natural and ordinary meaning of the Endorsement and its commercial purpose. The composite nature of the policy did not affect the analysis: although each insured under the policy was deemed to have separate insurance, the meaning of the term “Principal Assured” was the same in each such nominal separate insurance between each insured and the insurer. Treating the policy as a composite insurance did not alter the correct construction of that term and other authorities dealing with composite policies in different contexts did not assist.

James Brocklebank KC and Douglas Grant acted for the successful respondent, instructed by Angela Flaherty and Abigail Li of Clyde & Co LLP.

Peter MacDonald Eggers KC acted for the appellant, leading David Walsh of Essex Court Chambers, instructed by Jonathan Bruce and Marli Wildschut of HFW LLP.

Please click here to view a copy of the judgment.