Transcript LIABILITY AND INSURANCE

LIABILITY AND INSURANCE
- Legal Framework
Melvyn Carr
Office of the Crown Solicitor
Dec 05
1. Liability and Insurance

Liability and Insurance are distinct
concepts.

Unless a Contractor is liable, the
Contractor’s insurance status will be
largely irrelevant to the Principal.
2. How should liability be
secured?
Answer: By the negotiation and settlement of
an appropriate binding contract.
3. What is an appropriate
Contract?
Essential requirements must be met:
 Consideration
 Offer and acceptance
 Certainty
 formality
4. Liability is Never Enough
Liability must be tied to solvency.
[Little point suing “man of straw”.]
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
6. Insurance
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

The standard position in Crown Law
precedent documents is to require insurance
for:
Public risk
Workers compensation
Professional indemnity, if relevant
7. Other relevant types of
insurance
Personal accident insurance
 IT insurance
 Property insurance
 Motor Vehicle insurance
(comprehensive/third party)
 Business risk insurance
 Product insurance

8. Features of Crown Insurance
clauses
1)
2)
3)
4)
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
9. More Features
5)
6)
Quantums are recommended
Public Risk - $20 million
Professional Indemnity - $10 million
Use industry acceptable wording
10. Are the standard Insurance
clauses negotiable?
Yes/No
Yes
but subject to a proper risk
assessment
No
if guess work being used
11. What is a proper risk
assessment?
In summary:
 The matching of Crown risks (and potential
liabilities) against the Contractor’s offer of
limited liability
 A “good match” would support a decision to
accept the offer.
12. Professional Standards Act
2005





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