Riedweg v HCC International Insurance PLC – Contribution Act claims by liability insurers

Posted: 20/02/2025

With construction industry insolvencies remaining at a stubbornly high level, the judgment in Riedweg v HCC International Insurance PLC [2024] EWHC 2805 (Ch) is an important one for liability insurers facing direct claims against them under The Third Parties (Rights against Insurers) Act 2010 (‘TPRAIA’) following their insured contractor or consultant becoming insolvent.

The facts

In December 2016, Ms Riedweg entered into a contract for the purchase of a property which had been valued by Goldplaza Berkeley Square Ltd at £8 million. Ms Riedweg instructed Forsters LLP to act with respect to the purchase and was allegedly also advised by a Ms Victoria Johns. 

After later selling the property to a third party for £5.5 million, Ms Reidweg sought to recover losses of £2.2million, alleged to arise from Goldplaza’s gross overvaluation of the property. By this time, however, Goldplaza had been placed into members’ voluntary liquidation. HCC International Insurance PLC was Goldplaza’s professional indemnity insurer.  

The proceedings

The TPRAIA permits a claimant to commence proceedings directly against the insurer(s) of policyholders who have been placed into various forms of insolvency. This includes entities being wound up voluntarily (section 6(2)(d) TPRAIA). As such, Goldplaza’s rights as HCC’s insured ‘transferred to and vest in the person to whom the liability is or was incurred’ (section 1 TPRAIA). 

These proceedings were, therefore, a textbook example of the circumstances which the TPRAIA was designed for. Exercising her rights under the TPRAIA, Ms Riedweg commenced proceedings directly against HCC to recover her losses (said to arise from Goldplaza’s alleged negligence). 

In an attempt at mitigating its exposure to the claim, HCC applied for permission to pursue Part 20 claims under the Civil Liability (Contribution) Act 1978 (the ‘Contribution Act’) against Forsters and Ms Johns. The act enables a defendant to seek recovery of a proportion of its liability to a claimant from other parties who are also liable to the claimant with respect to the ‘same damage’. HCC argued that Forsters and Ms Johns were at least partially responsible for Ms Riedweg having overpaid for the property. 

Despite having foreshadowed that it may seek to issue Part 20 claims under the Contribution Act, HCC did not take steps to do so until the evening before the costs and case management hearing (CCMC) in the proceedings. As a result, the CCMC was adjourned for eight months until HCC’s application could be listed. Just three weeks before the further hearing, HHC served an amended application to bring its Part 20 contribution claims and substantial further witness evidence. 

The issue

Forsters opposed HCC’s application on substantive grounds, arguing that the parties’ potential liabilities were not in respect of the ‘same damage’. Specifically, it asserted that there was a distinction between HCC’s liability to Ms Riedweg, which would stem from its obligation to indemnify Goldplaza under the insurance policy, and Forsters’ liability to Ms Riedweg, which would arise from breach of a contractual or professional duty of care owed directly to her. 

The decision

In a short 12-page judgment, Master Brightwell dismissed HCC’s application to bring the contribution claims and accepted Forsters’ submissions that:

• it is settled law that an insurer's liability under its policy is distinct from an insured's liability to a claimant (Bovis Construction ltd v Commercial Union Assurance Co Ltd [2001] 1 Lloyd’s Rep 416, [28]); and 
• the TPRAIA scheme is a procedural process to facilitate claims against insurers of insolvent policyholders and does not affect that position. 

The net effect of the above was that the court held that, if HCC is liable to Ms Riedweg under the TPRAIA, it is not in respect of the ‘same damage’ for which Forsters may be liable to her. As such, as a matter of law, there was no basis on which HCC could bring a claim against Forsters or Ms Johns under the Contribution Act.

Interestingly, the judgment did not answer the related questions of whether HCC could join Goldplaza into the proceedings in order to allow a Contribution Act claim to proceed in Goldplaza’s name and/or whether HCC could subrogate into Goldplaza’s rights and bring such a claim. Master Brightwell found that such issues did not directly arise on the application before him, and did not affect his legal analysis of the ‘same damage’ argument. 

Comments

This is a potentially important decision for liability insurers, especially those who insure contractors and consultants in the construction industry. 

Construction insolvencies are notoriously commonplace and insurers are increasingly facing direct claims against them under the TPRAIA after their insured has entered a form of insolvency. This decision makes clear that insurers in this position cannot bring recovery actions in their own name by claiming under the Contribution Act against others involved in the construction project who may also be liable to the claimant. 

This is potentially an important restriction on insurers’ ability to reduce or mitigate their outlay on such claims. That said, there may well be more in the future on this issue, including whether the doctrine of subrogation will ultimately provide a way round this for insurers. 

This article was co-written with Jordan Ball, associate in the construction team.

Return to news headlines