Category: Insurance case law · Reviewed by Matt Bartlett, Director · Founder · Last reviewed June 2026
TCC ruling on the scope of a consequential loss exclusion in an IT outsourcing contract: a claim for wasted expenditure following IBM’s repudiation of a major insurance-platform project was held to fall within an exclusion of “loss of profit” and so was not recoverable.
CIS General Insurance Ltd (“CISGIL”), part of the Co-operative Group’s insurance business, engaged IBM United Kingdom Ltd in 2015 under a Master Services Agreement (MSA) to deliver a major IT transformation programme for its general insurance underwriting and policy administration platform. The programme was intended to replace ageing legacy systems and provide CISGIL with a modern, configurable platform on which to underwrite home, motor and other personal lines business.
The project ran into serious difficulty. Following protracted disputes over scope, milestone delivery, change requests and the non-payment of an invoice by CISGIL, IBM purported to terminate the MSA in 2017, alleging non-payment as a repudiatory breach. CISGIL contended that IBM’s purported termination was itself a wrongful repudiation and accepted it as terminating the contract.
CISGIL claimed damages in the region of £128 million, the great majority of which represented wasted expenditure on the project: sums paid to IBM, internal costs, third-party costs, and the cost of procuring an alternative or remaining on the legacy system. CISGIL also pleaded loss of anticipated savings and benefits that the new platform would have produced.
IBM relied, among other defences, on a limitation-of-liability clause in the MSA that excluded liability for “loss of profit, revenue, savings (including anticipated savings) … ” and other consequential losses, subject to specified carve-outs. IBM contended that CISGIL’s wasted expenditure claim was in substance a claim for the lost benefits and savings the new platform would have generated and therefore fell within the exclusion of loss of profit and anticipated savings.
The action came before O’Farrell J in the TCC, who heard extensive evidence on the course of the project, the disputes over invoices, and the construction of the limitation clauses.
The principal issues for the court were:
(1) Whether IBM’s purported termination of the MSA in 2017 was a lawful termination for repudiatory breach by CISGIL (non-payment of an invoice) or itself amounted to a wrongful repudiation.
(2) On the assumption that CISGIL succeeded on liability, whether its wasted-expenditure claim — comprising sums spent on the project and on transition — was recoverable in principle as damages for repudiatory breach, or whether it was caught by the consequential loss exclusion in the MSA, in particular the exclusion of “loss of profit, revenue, savings (including anticipated savings)”.
(3) The proper construction of consequential loss exclusions in complex IT outsourcing contracts and whether such exclusions can extend to “wasted expenditure” reliance-based damages claims.
O’Farrell J held that IBM’s termination of the MSA had been wrongful and amounted to a repudiatory breach which CISGIL had validly accepted. CISGIL therefore succeeded on liability.
On the critical exclusion clause issue, however, the judge held that the bulk of CISGIL’s claim was barred by the limitation-of-liability provision. The Court analysed the wasted-expenditure claim as a “reliance” measure of damages, alternative to the “expectation” measure (loss of bargain). The court held that this alternative measure of damages did not change the substantive nature of the loss being claimed: CISGIL was in reality seeking to recover the financial benefits that the IT transformation was expected to deliver, including operating cost savings and revenue improvements. Those benefits fell squarely within the excluded categories of “loss of profit, revenue, savings (including anticipated savings)”.
The judge accepted that some heads of loss might fall outside the exclusion (for example, certain wasted third-party costs that did not represent recovery of lost profits/savings) but concluded that on the structure of the claim and the limitation clause, the great majority of the £128 million claim was excluded. The damages ultimately awarded were substantially less than claimed.
The decision did not turn on the reasonableness of the clause under the Unfair Contract Terms Act 1977; the parties accepted the clause was enforceable as between commercial parties of equal bargaining power.
The ratio is that, where a commercial contract excludes liability for “loss of profit”, “loss of revenue”, or “loss of savings (including anticipated savings)”, a claimant cannot circumvent that exclusion simply by pleading its loss as wasted expenditure or “reliance damages”. The court will look at the substance of what is being claimed. Where the wasted expenditure is in reality the financial benefits the project was expected to deliver, the claim falls within the consequential-loss exclusion and is irrecoverable.
This represents a clear analytical advance on earlier authorities such as Anglia Television v Reed and Omak Maritime v Mamola Challenger: reliance damages are not a separate, immune species of loss but a measure of the same underlying loss of bargain that the parties have agreed to exclude.
Although CIS General Insurance v IBM is, strictly, a TCC decision on a commercial IT outsourcing contract rather than a marine insurance case, it has substantial significance across the insurance sector for two reasons.
First, the claimant, CISGIL, is a regulated general insurer. The case is widely cited as a cautionary tale for insurers and large brokers procuring core platform technology — illustrating how a wrongful supplier termination can still leave the insurer largely without remedy if the contract excludes loss of profit and savings. Risk managers and procurement teams in insurance businesses have used the decision to revisit limitation clauses in IT, outsourcing, BPO and SaaS contracts. It is also relevant to professional indemnity insurers writing technology errors-and-omissions cover.
Second, the analytical framework — looking at the substance of a claim rather than its label — is directly applicable to construction of exclusion clauses in liability insurance policies, professional indemnity wordings, cyber policies and business interruption cover. The decision reinforces that English courts will give effect to clearly worded consequential-loss exclusions between sophisticated commercial parties and will not allow such exclusions to be sidestepped through creative pleading. This has knock-on consequences for the way professional indemnity insurers underwrite tech-services risks and how aggregation and quantum issues are argued.
The case has also fed into wider market discussion about the contractual allocation of risk in large outsourcing deals and the role of insurance in plugging gaps that limitation clauses create.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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