All that Glitters...
All that Glitters…..
“There is no such thing as a free lunch” and “all that glitters is not gold”. Do these sound familiar? I have certainly trotted out such lines on more than one occasion when discussing insurance with clients.
Remember Builder’s Accident Insurance Ltd? What about Independent Insurance Company Limited? - and now it looks like Quinn Insurance Limited is in trouble. These companies all have one thing in common. Yes, you’ve guessed it. They ended up in trouble or, even worse, insolvent, working on a “stack it high, sell it cheap” philosophy. “So what”? you might say, “Why should I be interested?” you might add. Well, if you were insured with any of these companies you could have a huge problem. Why? Well, as Alexsandr Orlov, my favourite TV Meerkat, would say ... ”It’s simple”. No insurance means un-insured liability and un-insured liability could lead to insolvency.
OK, so far so bad! What else is there to say?
Hands up all those Contractors and Sub-Contractors who have their Employer’s Liability insurance (“EL”) with one company, their Public Liability insurance (“PL”) with another company and their Professional Indemnity insurance (“PI”) cover with yet another. And, let me guess, you have been advised or decided to do this in order to save money…… but what about gaps in cover? “What gaps?” you say.
Let’s assume that you have a contract to design and build a new office building. Let’s assume that things go quite wrong and as a result of a design error your building fails and causes substantial damage to an adjoining building. Under which policy are you going to make your insurance claim? Have you checked the policy wording? Your PI policy will cover your losses in re-instating the building you have contracted to design and build but what about the damage to the adjoining building? A standard PI policy wording will exclude third party liability arising from defective design. “No problem” you say “Let’s make a claim under our PL policy”. But a standard PL wording excludes liability arising from defective design. Can you see the gap now? The damage to the adjoining building is simply not insured.
So here are some very simple ideas to think about.
i) Be sure that your Insurer is going to be able to meet a claim if you need to make one.
ii) Placing your insurance cover with separate insurers in order to save money is potentially “penny wise and pound foolish” and not always a good idea.
iii) Read your policy wording(s) and find out what risks are NOT insured
iv) Some risks are not worth insuring but you need to know what these are.
v) Why not speak to the experts and get some proper advice!
Peter Vinden is a practising adjudicator, mediator, expert and specialist insurance advisor to the construction industry. He is Managing Director of Vinden and can be contacted by email at firstname.lastname@example.org . For similar articles visit www.vinden.co.uk