Insurance and the contractor in the age of blameIan 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.

• A cultural issue

• Class actions and do-gooder/greedy lawyers

• A whole new legal industry and growing

Thanks America

• 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

• Consumer can force you to replace• And pay for repairs• Can you actually recover?

– in Australia?– solvent?– appropriate insurance?– exclusion clauses (if over $40K)?

Australian Consumer Law (cont.)

• 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

What you should be doing…

• Public Liability Insurance• WorkCover• Professional Indemnity Insurance• Business Interruption Insurance• Directors and Officers Insurance• Product Recall Insurance• Product Guarantee Insurance

Basic types of cover

• 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

– 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

Public Liability Insurance (con’t)

• Injury, death or economic loss due to:-– 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)

Professional Indemnity 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

Directors and Officers Insurance

• Injury or property damage caused by supply, service or repair of products

• Covers legal defence costs

Product Liability Insurance

• Often not covered by product liability insurance

• Defective DC Isolators; solar panels; pumps

Product Recalls by ACCC and others

• Covers injury or property damage from product failure to perform for intended purpose

•  Might be in Public Liability policy

Product Guarantee Insurance

• Contractual liability– from indemnities– other events – e.g. damage from weather

• Very common• Rarely insurable

Case study 1

• DC Isolators –• Foreign manufacturer – good luck suing in

China/Vietnam• Beware the two dollar company importer/supplier

– 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

Case study 2

• 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

Conclusion