In what is being heralded as a groundbreaking legal precedent, the Thai Court has affirmed the rejection of coverage in a case involving the catastrophic failure of a wind turbine, as advocated by Clyde & Co’s legal team in Thailand.
The court’s decision, deeming the adherence to “industry practice” by the manufacturer and contractor as insufficient when weighed against evidence of gross negligence presented by insurers, establishes a precedent for renewable energy manufacturers and contractors. The ruling emphasizes the necessity for these entities to diligently ensure that subcontractors fulfill their responsibilities. Failure to detect lapses by subcontractors could result in insurance coverage being denied.
The case originated from a 2018 incident wherein a wind turbine nacelle in Thailand collapsed. An investigation disclosed that bolts connecting the 195-ton nacelle and blades to the tower had gradually loosened and fallen out, causing the remaining bolts to shear under stress, resulting in the nacelle and blades plummeting 157 meters to the ground. Fortunately, no injuries were reported from the incident.
It was revealed that a subcontractor had failed to tighten the bolts to the required torque, leading to their loosening due to the turbine’s movement and vibrations. Furthermore, an employee of the claimants was found to have disabled vibration alarms and reset the wind turbine without conducting an inspection, actions that could have prevented the loss.
During the defects liability period, the manufacturer, bound by contractual obligations to repair the damage, sought reimbursement from insurers. However, insurers, citing exclusions such as those for gross negligence, rejected the claim.
The court’s ruling determined that the main contractor, a subsidiary of the manufacturer, had failed to ensure that the work was executed properly. Consequently, the court dismissed their claim against insurers, who were awarded costs.
Ian Johnston, a partner at Clyde & Co Bangkok, commented on the decision, noting the contradiction in turbine supply agreements that hold manufacturers responsible for subcontractors’ work yet allow them to pass the cost of breaches to insurers. Johnston highlighted the potential impact on renewables insurance, suggesting that this ruling could elevate manufacturers to a higher standard than industry practice, marking a potential paradigm shift in the sector.
