Insurance and the contractor in the
age of blame
Ian Heathwood | Principal BA LLB (Hons) Grad Dip LP
This information is only of a general nature, should
not be applied to individual situations without
seeking further specialised advice, is focused on
particular issues and is not intended to be an
exhaustive representation of the different legal
issues. We are not providing any accounting,
taxation, financial advice – you should seek advice
from the appropriate professional.
Thanks America
• A cultural issue
• Class actions and do-gooder/greedy lawyers
• A whole new legal industry and growing
Australian Consumer Law
• Series of implied warranties
• For the benefit “consumers”
• Consumer – what you think plus commercial
under $40,000
• Liability for manufacturer, importer, your
supplier, you as installer
Australian Consumer Law (cont.)
• Consumer can force you to replace
• And pay for repairs
• Can you actually recover?
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in Australia?
solvent?
appropriate insurance?
exclusion clauses (if over $40K)?
What you should be doing…
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Check all supplier contacts
Check all supplier insurance
Don’t deal with tin-pot suppliers
Have your insurance in order
Back it up with real asset protection
Basic types of cover
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Public Liability Insurance
WorkCover
Professional Indemnity Insurance
Business Interruption Insurance
Directors and Officers Insurance
Product Recall Insurance
Product Guarantee Insurance
Public Liability Insurance
• Covers damage to third party as a result of your
business activities
• Not claims by employees unless
"Employer's Liability cover“
• Often not negligent advice
• Does it cover: –
– interruption of third-party business
– legal and court costs
Public Liability Insurance (con’t)
– damage to underground services
and resulting damage
– damage due to faulty workmanship
– covered if negligence is by your subcontractor
– unregistered vehicles – e.g. trailers
– tax audit costs
– damage to goods in transit
Professional Indemnity Insurance
• Injury, death or economic loss due to:–
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bad design
wrong advice
incorrect contract administration resulting in loss
sometimes breach of contract
• Liability possible even if no charge
• Protects business, directors and employees
(not fraud or crime)
Directors and Officers Insurance
• Does not cover company
• Covers senior management staff
• Liability for their actions and decisions as a
company officer/manager
• Defence legal costs – civil, criminal and
regulatory
• Employment risks?
• Extremely complex policies – many exclusions
Product Liability Insurance
• Injury or property damage caused by supply,
service or repair of products
• Covers legal defence costs
Product Recalls by ACCC and others
• Often not covered by product liability insurance
• Defective DC Isolators; solar panels; pumps
Product Guarantee Insurance
• Covers injury or property damage from product
failure to perform for intended purpose
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Might be in Public Liability policy
Case study 1
• Contractual liability
– from indemnities
– other events – e.g. damage from weather
• Very common
• Rarely insurable
Case study 2
• DC Isolators –
• Foreign manufacturer – good luck suing in
China/Vietnam
• Beware the two dollar company importer/supplier
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importer – no product liability insurance
contractors – no recall or product guarantee insurance
importer insolvent
multiple claims – unsustainable
“restructure" only option
correct structure before problems – only real answer
Conclusion
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Right, Australian, solvent and insured suppliers
Right insurance for you
Have a good broker
But… a broker is your agent, not the insurer’s!
Have broker confirm contractual liabilities
covered
• Legal advice where any doubt
• Have proper asset protection in place