Joint names policy
A joint names policy is type of insurance often required by construction contracts. The policy is typically held jointly by the employer and the contractor, although other parties such as funders may also wish to be included. The key feature of this type of policy is that the insured parties are unable to claim against one another in respect of an insured loss, as they are considered to be one-and-the-same for the purposes of the insurance.
This has a number of advantages. Firstly, it means that neither party needs to take out its own insurance policy, which can lead to dual insurance, unnecessarily increasing the project’s total insurance cost. Secondly, it can help avoid costly litigation between the jointly-insured parties who may otherwise try to claim against the other. In addition, the policy cannot be cancelled without both the parties being aware of this.
The insurer has no rights of subrogation, meaning that they cannot recover amounts paid to one of the insured by pursuing the other.
Joint names policies are also common on building contracts involving renovations and extensions, where it is normally taken out by the property owner/employer and building contractor. Typically this covers both the existing structure and the works themselves, and means the property owner/employer is entitled to the proceeds of a claim made under the cover, which they would not be entitled to if the works cover were in the contractor’s name alone. This helps protect them against the potential insolvency of the contractor, or problems claiming disputed amounts.
In the case of Tyco v Rolls Royce, a fire protection scheme, designed and installed by the claimant, leaked and damaged parts of the building that were separate from the works. Before beginning the work, the claimant had agreed to indemnify the defendant against damage that may result from their negligence, and the defendant was required to maintain joint names insurance in respect of ‘specified perils’.
The defendant claimed damages to which the claimant argued it could not be held liable, as the contract had required a joint names policy which the defendant had failed to take out. They argued that had the defendant taken out the policy, they would have been able to claim damages from the insurer.
The court initially ruled that the claimant could not be liable because the defendant had failed to take out the appropriate insurance as specified by the contractual scheme adopted by both parties.
However, the Court of Appeal overturned this ruling, finding that the contract only referred to a joint names policy with ‘others’, including ‘contractors’ and that this did not specifically identify Tyco. In any event, joint names insurance would not necessarily have prevented a subrogated action against the contractor. This would only have been prevented by express terms in the policy prohibiting it.
 Related articles on Designing Buildings Wiki:
- Contract works insurance.
- Design liability.
- Directors and officers insurance.
- Excepted risk.
- Flood insurance.
- Latent defects insurance.
- Legal indemnities.
- Professional Indemnity Insurance.
- Specified perils in construction contracts.
 External references
- JCT Insurance - Joint names insurance
- Mondaq - Joint names insurance and risk allocation in construction projects
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