into an insurance hole Julie Kinnear, Partner Whats covered Risk - PowerPoint PPT Presentation

How to avoid digging yourself into an insurance hole Julie Kinnear, Partner

What’s covered • Risk & Insurance – Why you need to understand the risk and the cover you have or need. • Insurance clauses in contracts – Why you need to read them. – What does noting another party’s interest really mean ? – What does giving an indemnity mean and why you should care.

Contract & Risk • Risk can be: – Priced – Minimised – Allocated – Transferred – Accepted – Rejected But not Ignored!

Insurance Clauses why you need to read them • Insurance clauses will specify: – The nature and extent of cover required. – Who is required to take out the cover. • Requires understanding of: – the risk. – nature and extent of cover required. – how cover operates – availability of cover in the market.

Insurance Clauses • Some things to consider: – Who should take out the insurance – Naming other parties as an additional insured – Level of cover – Period of cover – Provisions of cover & solvency of insurer – Consistency across the contract – Proof of insurance

Noting Interests & Named Insured • Noting a party’s interest or naming the party as an insured under your policy – is there a difference? • Failure to obtain insurance as required by the contract will be treated as a breach. • Thiess Contractors Pty Ltd v Norcon Pty Ltd (2001) WASCA 364

Limitations of Insurance • Insurance one of many ways to manage risk. • Exceptions to cover – read the policy! • Adequacy of cover only tested when a loss occurs and claim is made.

Impact of Insurance on other provisions • Indemnity clauses – Powerful tool in allocating risk between parties; – Provided clause is unambiguous, consistent with the contract as a whole and does not fall foul of any other law no reason to assume will not be enforced. – Can leave indemnifying party uninsured!

A typical indemnity clause The contractor will without limitation indemnify the principal for any loss, damage, expense, claim or liability suffered or incurred by the principal, caused directly or indirectly by services provided by the contractor or any of its subcontractors pursuant to this agreement.

Contractual Liabilities • Contractual liability exclusions: ‘no cover will apply where an insured has assumed liabilities under contract or agreement (whether express or implied) that would not otherwise attach to them by law in the absence of such contract or agreement’

Contractual Liability some things to consider • Capping liability – Limits of indemnity under policies • Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) – Apportionable claims – breach of contractual duty of care – Contracting out? – Uninsured risk!

Tips • Know your cover. • Read the insurance and any indemnity clauses carefully – ignorance or assumptions can prove to be expensive. • Involve your broker and insurer. • Best way to avoid digging yourself into an insurance hole is not to pick up the shovel in the first place!

Questions