Contractual Liability Insurance covers you for injury or damage that you are responsible for under a contract.
This includes injury and damages that you may not technically be negligent for however, under your contractual obligations you are required to cover the incident under your contractual liability insurance policy.
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Contractual Liability Insurance in essence is your liability your damages and personal injury caused which you are responsible for under contract. These contracts are typically agreed to when you are performing work as a sub-contractor to either another contracted party or the head contractor of a construction site. If you’ve never actually gone through your sub-contractor agreements then there is a good chance that you are signing a document which means that you are agreeing to be responsible for damages caused even if you arent 100% negligent for the damages.
A lot of contractors seems to think that their Public Liability Insurance will cover them in these situations however, this is not always the case. Yes, there are some policies that will extend their cover to your contractual liability however, this is not a standard inclusion.
As an Insurance Broker we work with our clients and assist them with their contactual obligations as far as their insurance requirements go. This will typically include looking over their contractor agreements to see if contractual liability insurance is required or not. If it is, we bring this to your attention and discuss your options around this.
Trust me, its not all doom and gloom – contractual liability insurance is a common thing and shouldn’t put you off signing that contractors agreement that you worked so hard on during the tender process however, it can become very costly if you don’t insure against it correctly.
Why should you use Priority Insurance Brokers to arrange your Contractual Liability Insurance?
The easiest way to explain contractual liability is by considering real world situations. When you pick up a new contract and you sign off on the agreement some clauses will outline a condition where you are responsible for damages and personal injury even if you aren't the negligent party. This means that the head contractor has passed on this liability which you have accepted by signing the agreement.
Yes, it's quite common, especially in the construction industry. Most construction projects typically consist of a head contractor who has won the tender who then contracts out a large portion of the works to their appointed sub-contractors. By requiring contractors to sign a contractual liability agreement this allows the head contractor to keep their costs affordable and their claims history under control.
Technically speaking, a standard Public Liability Insurance would cover these circumstances however, the key trigger to this policy is that you have to be the negligent party. A contractual liability insurance policy would provide cover even if you weren't negligent in causing the damages but are liable under the contract you have agreed to.
Contractual liability can be put in any commercial contract and it is essentially up to you as the signing party to review the contract in its entirety. Contractual liability can be passed on in sub-contractor agreements or even a commercial lease agreements.
We understand that running a business takes a lot of work and as a business owner you’re expected to be across all of the different aspects of your business operation. We have tried to make our process as simple as possible and all of our Brokers work with each business owners to have a strong understanding of your business and whats required to be in place to ensure that there are no nasty surprises. We pride ourselves on not hiding behind the fine print.
Here is a real life claim example which clearly outlines why you should have contractual liability insurance included in your insurance program. Or, why you should review your current contracts and see if this is something that is required or not.
A sub-contractor was operating machinery on a construction site where a serious injury occured. The incident escalated and multiple parties were engaged in court proceedings where it was found that the machinery operator was found liable for 30% portion. The reamining portion went 70% to the main contractor.
The Public Liability insurance of the sub-contractor agreed to pay the damages for the 30% portion however, there was no contractual liability clauses included in the policy, nor was the insurer made aware of the sub-contractor entering into a contract of this sort.
This then left 70% of the claim costs essentially uninsured and the costs were required to be paid by the sub-contracting entity.
As a signing party to a legal contract you need to understand the requirements of that contract and how they could potentially effect you. It is important to communicate with your Broker as most business insurance brokers will typically provide a free contract review.
Other policies that we typically recommend along side a dry hire insurance policy is:
We specialise in managing insurance programs and assist with bundling multiple insurance policies together to ensure that there are no exposures that are left uninsured.
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The first step is to speak with an Insurance Broker so that we can ask questions about your business and get familiar with how you operate. This allows us to tailor a suitable package to your needs.
If you currently have contracts in place, we work with clients to offer a review process where we can review your current contracts and advise you on whether any contractual liability clauses apply under your current terms.
We will then contact a number of our insurers and request them to provide us with a quote. Once all of our quotes come back, we will review them and present you with the best option. We will outline our recommendation to you and seek your acceptance.
Once we have your instructions to proceed with the policy we will then organise payment of the policies. Policies can be paid annually or via our monthly premium funding options.
You can however, dealing with contractual liabilites and sub-contractor agreements is where it starts to get quite technical. In most circumstances, you will get a better level of cover that is priced more competitive by using a Broker. The advice will usually come as an additional bonus.
No, you don’t. For full transparency of our remuneration, insurers pay us an agreed commission when you proceed with the policy. This is not in addition to what you pay and in most cases we are able to pass on a cost reduction to our clients by finding a more competitive policy or by reducing the impact of their quoted renewal premiums.
Contractual liability policies are usually written on an occurence basis so as long as the incident hasnt occured already and you haven’t been notified or made aware of such incident than we can usually get cover. This should be done sooner rather than later.
Sure you can however, most big building companies and head contractors will usually just move onto the next contractor if you aren’t willing to sign their agreement. These clauses protect them from potentially large loss claims and for a big building company, if they have large loss claims on their claims history this can drastically increase their premiums or their ability to obtain insurance cover.
Your level of risk and exposure is up to you however, if you go down this route than assume that you have no cover in place what so ever. The additional premium usually isn’t much more than what you are typically paying however, by not having it covered you could be opening yourself up to far greater costs.
You should consider the contractual liability cover as soon as you look to sign a contract of engagement or an agreement where it is required. By considering, I mean speaking with your Broker and review the expected cost outlay compared to the income and future work received from the contracting company to decide whats best for your business.
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