LIABILITY AND INSURANCE Legal Framework

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LIABILITY AND INSURANCE- Legal Framework

• Melvyn Carr
• Office of the Crown Solicitor
• Dec 05

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1. Liability and Insurance

• Liability and Insurance are distinct
• concepts.
• Unless a Contractor is liable, the
• Contractors insurance status will be
• largely irrelevant to the Principal.

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How should liability besecured?

• Answer By the negotiation and settlement of
• an appropriate binding contract.

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What is an appropriate Contract?

• Essential requirements must be met
• Consideration
• Offer and acceptance
• Certainty
• formality

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4. Liability is Never Enough

• Liability must be tied to solvency.
• Little point suing man of straw.

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5. Solvency

• Solvency can be achieved by
• Cash deposit
• Retention money
• Performance undertaking (Parent Company)
• Financial undertaking (Bank Guarantee)
• Guarantees (Directors)
• Etc
• and
• by INSURANCE

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6. Insurance

• The standard position in Crown Law precedent
  documents is to require insurance for
• Public risk
• Workers compensation
• Professional indemnity, if relevant

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7. Other relevant types of insurance

• Personal accident insurance
• IT insurance
• Property insurance
• Motor Vehicle insurance (comprehensive/third
  party)
• Business risk insurance
• Product insurance

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8. Features of Crown Insurance clauses

• Crown to be named as in insured party
• Evidence of insurance required
• Crown can insure, at expense of Contractor, if
  Contractor fails to insure
• Professional Indemnity must be maintained for 3
  years after expiration of Contract

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9. More Features

• Quantums are recommended
• Public Risk - 20 million
• Professional Indemnity - 10 million
• Use industry acceptable wording

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Are the standard Insuranceclauses negotiable?

• Yes/No
• Yes but subject to a proper risk assessment
• No if guess work being used

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What is a proper riskassessment?

• In summary
• The matching of Crown risks (and potential
  liabilities) against the Contractors offer of
  limited liability
• A good match would support a decision to accept
  the offer.

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Professional Standards Act2005

• New Act
• Commenced August 2005
• Enables occupational associations to register
  schemes and thereby limit professional liability
• The liability caps set by the Act will override
  contract provisions
• It is therefore important, if appropriate, to
  require a Contractor to obtain an approval under
  the scheme for a higher level of liability