With over 35 years in the industry, Glenn has been kind enough to share just a snippet of his knowledge by answering some commonly asked questions relating to General Liability Insurance.
How does using subcontractors impact liability insurance?
Often businesses will use subcontractors to undertake various activities on their behalf, this could be due to any number of reasons such as; being required for a specialist activity eg erection of scaffolding, maybe as a result of unplanned increased workload or even a preference to use a subcontracted workforce.
Subcontractors are not normally covered under the insured’s liability policy, so it’s good business practice to confirm that any subcontractors being used hold adequate liability insurance. This is achieved by obtaining a certificate of currency, a copy of which should be kept on file. Where a subcontractor is being used for a particular contract or will be working for the insured for an extended period, it’s also a good idea for the insured to named as a principal under the subcontractors’ liability insurance. This way if the subcontractor is responsible for a claim, it’ll be made under their policy and the insured will be protected for any vicarious liability as a principal.
Sometimes subcontractors don’t have insurance in place or the insured just wants to endorse their policy to include subcontractors. This can generally be done subject to normal underwriting of the risk, payment of some additional premium and would be limited it to work undertaken on behalf of the insured
What are worker to worker claims?
Worker to worker claims relate to Injuries to labour hire staff, contractors, sub-contractors or employees of any contractors or sub-contractors that are performing work for or on behalf of the insured. The insured owes a duty care for the health and safety of these workers.
Labour hire staff are generally owed a greater duty of care as they operate totally under the instruction and supervision of the insured. Subcontractors and their workers are considered more responsible for their own health and safety, the insured still owes a duty of care albeit.
Each state has their own workers compensation programs. Typically, the injured workers claim from their employer’s workers compensation insurer. The workers compensation insurer investigates the circumstances of the claim and looks for opportunities to recover some / all of the cost of the claim from the host employer.
With the increase in use of contract labour over the past 10 – 15 years, this has become a major underwriting issue for insurers. Worker to worker claims are generally long tail in nature and can be substantial in cost.
How can contractual liability influence liability insurance?
General liability policy wordings will normally exclude contractual liability, although nominated contracts might be agreed, considering; the scope of works, contract value, term, indemnity and insurance requirements.
Insurance requirements can be the likes of confirmation of insurances being in place, inclusion of a cross liability clause, being named as principal and/or agreement to waive subrogation.
Generally, the position at Common Law is each party is responsible for their own acts or omissions. Contractual liability seeks to modify this, which can be used to clarify responsibilities or sometimes used to the principal’s advantage. Indemnity clauses can vary the Common Law position as follows;
- Hold harmless with write back – this is like Common Law (depending on how its worded), essentially the contract principal is being is being held harmless, but this is then proportionally reduced by the impact their act or omission might have on a claim.
- Mutual hold harmless – here each party agrees to hold the other party harmless for the areas for which they are responsible under the contract
- Full hold harmless – in this case the contract principal is being is being held fully harmless under the contract, so the contracted party is agreeing to pay all claims irrespective of the cause, under the contract. Great for the Principal, not so great for the contractor (or their insurer!).
Nominated contracts can be endorsed on to the liability policy and will sometimes include higher excess for any “liability assumed under contract
How does Principal’s Indemnity work?
Often insurers are asked to include principals as named insureds in respect of specific projects or contracts, but this is generally baulked at due to possible unforeseen issues that may arise outside the contract. The principals’ indemnity clause provides for this.
The principals’ indemnity clause effectively names the principal as an insured party in respect of their vicarious liability, but only to the extent required by the contract or agreement and subject to normal policy limits, terms and conditions.
So, if there’s a claim against or the contractor and the principal, arising out of an act or omission of the contractor, the principal will be covered under the contractors liability policy as an insured party.