Renewables victory for insurers in Thailand of global significance

Clyde & Co’s team in Thailand successfully represented insurers in securing major decision from Thai Court

Bangkok, 10 January 2024: Clyde & Co’s team in Thailand successfully represented insurers in securing a major decision from the Thai Court confirming denial of coverage for a catastrophic failure of a wind turbine. The decision held that the manufacturer and contractor’s reliance on ‘industry practice’ was insufficient to overcome evidence of gross negligence put forward by insurers. Going forward, renewables manufacturers and contractors will be required to take greater care to ensure sub-contractors are performing their duties, lest coverage be declined as they are held responsible for not identifying breaches by such sub-contractors.

The case related to the collapse of a wind turbine nacelle in Thailand in 2018. Investigation found that the bolts holding the 195 tons of nacelle and blades to the tower had gradually loosened and fallen out, until remaining bolts sheared under the stress – leaving the nacelle and blades to collapse 157 metres to the ground. There were no injuries as a result of the failure.

The cause of the loosening of the bolts was found to be that the sub-contractor did not tighten the bolts according to the necessary torque. This mean that as the wind turbine moved and vibrated the bolts loosened, with catastrophic effect. In addition, it was discovered an employee of the claimants had been responsible for turning off vibration alarms and resetting the wind turbine without inspection – that could have prevented the loss.

As the wind turbine was within the defects liability period, the manufacturer was contractually obliged to repair the damage. They then turned to insurers to pay for such damage. On examination of the facts, insurers relied on various exclusions – including that for gross negligence.

The court found that while the sub-contractor was responsible for not tightening the bolts properly, the main contractor (a subsidiary of the manufacturer) had been proven by insurers to have not taken sufficient care to discharge the burden on them to ensure work was properly undertaken. Their claim against insurers was dismissed, with costs granted to insurers.

Ian Johnston, Partner at Clyde & Co in Bangkok, said: “This decision highlights the contradiction in turbine supply agreements that says manufacturers will be responsible for the work of sub-contractors, but then allows them to pass the cost of breaches to insurers – with premium ultimately paid by the owner. Manufacturers will now have to take greater care to ensure the sub-contractor performed their tasks with due diligence and up to contractual standard. In terms of renewables insurance, this could be a game changer for holding manufacturers to a higher standard than industry practice.”

Sorawat Wongkaweepairot, Legal Director at Clyde & Co in Bangkok, commented: “We were able to establish to the court’s satisfaction that the manufacturer and contractor’s steps and reliance on quality assurance documents of the sub-contractor were insufficient to fulfil the duty on them.”