CU Sep-Oct 2023

INDUSTRYcomment
settlements and proceedings - it has
been a tough few years for the
insurance market leading to insurers
being more wary about the risks posed
by our industry. Some insurers have
gone so far as to pull out or at least pull
back from their offerings within our
industry. This can be seen most
prominently in the area of insurance
cover for 'fire and façade'-related
services. Following the Grenfell tragedy
and ongoing investigations insurance in
this area is limited, with some smaller
organisations unable to get insurance
for such services at all.
As an added complexity, insurance
cover for such fire and façade design
services is currently only available in the
UK insurance market on an "aggregate"
basis (discussed below) and at lower
insurance limits than other categories of
services due to the inevitable higher
risks of claims involved. I have heard
this trend is spreading to other regions.
Therefore in contract negotiations,
Parties really need to make sure they
agree a fair and proportional, riskmitigated
position. There is no point in a
high limit being required that doesn't
match available cover, as insurance
cover that is overstretched and overpromised
will surely cause more
problems than it solves.
An aspect that often causes confusion
but is vital to understand - not least
because it is a frequent bone of
contention between contracting parties -
is whether one's insurance is on an
"aggregate" or "each and every claim"
basis. Why is it so contentious? It
fundamentally impacts how much one is
covered by insurance. At its core
simplicity (though there are more
subtleties that I will not bore you with),
an aggregate policy has one bucket of
money (e.g. £5m) for all claims
occurring during the policy period
(which is generally one year), and an
each and every claim policy has a
bucket of a specified sum (e.g. up to
£5m) for each claim received during the
policy period.
It is self-evident that there is a big
difference between the two, given that
an organisation will be faced with
meeting any shortfall in a claim (and
legal costs) personally once their
insurance limits run out.
As a side but related issue, when
looking at insurance cover issues on a
wider basis there can be a temptation to
choose the cheapest premium option in
order to save money, confident in the
belief that large claims or problems are
unlikely to occur. However, this is often
a false economy.
Like clients who choose the lowest
priced tender whilst ignoring quality - or
indeed choosing a cheap home or travel
insurance for your personal activities -
you could be at risk of having a policy
that is simply not fit for your purposes or
needs. This only becomes apparent
when insurers politely decline your
notification, pointing out it does not fall
within the ambit of your selected policy
or is excluded because you failed to fully
and honestly disclose all relevant facts
during your policy.
So, let us come to the negotiation table
with an open, collaborative mindset,
seeking to agree insurance
requirements that are reasonable for the
project, and realistically achievable for
the parties concerned. Also in doing so,
taking the time to discuss one's
business requirements with one's
insurance broker and professional
advisors to make sure everything fits
seamlessly to minimise unhappy
surprises in this area. This requires
thinking about not only what your
organisation is doing and needs now,
but how your business intends to grow
and shape in the coming year.
One's insurance broker, combined with
relevant professional advisors and
internal team, are best placed to work
together to be your champions and
experts in this area. Conversely, making
inflexible demands will simply lead to
deadlock and grievance - which is
certainly against the intentions of
insurance in the first place.
This article is for information purposes
only and should not be taken as legal
advice. Specialist professional advice
should be obtained on any insurance
and legal matters.
September/October 2022 15