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Insurance and the contractor in the age of blame

This informative article discusses the importance of insurance for contractors in Australia, particularly in relation to the Australian Consumer Law. It covers topics such as implied warranties, liability for manufacturers and installers, and the types of insurance coverage contractors should have. The article also includes case studies highlighting the risks and challenges contractors may face without proper insurance.

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Insurance and the contractor in the age of blame

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  1. Insurance and the contractor in the age of blame Ian Heathwood | Principal BA LLB (Hons) Grad Dip LP

  2. 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.

  3. Thanks America • A cultural issue • Class actions and do-gooder/greedy lawyers • A whole new legal industry and growing

  4. 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

  5. Australian Consumer Law (cont.) • Consumer can force you to replace • And pay for repairs • Can you actually recover? • in Australia? • solvent? • appropriate insurance? • exclusion clauses (if over $40K)?

  6. What you should be doing… • 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

  7. Basic types of cover • Public Liability Insurance • WorkCover • Professional Indemnity Insurance • Business Interruption Insurance • Directors and Officers Insurance • Product Recall Insurance • Product Guarantee Insurance

  8. 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

  9. 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

  10. Professional Indemnity Insurance • 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)

  11. 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

  12. Product Liability Insurance • Injury or property damage caused by supply, service or repair of products • Covers legal defence costs

  13. Product Recalls by ACCC and others • Often not covered by product liability insurance • Defective DC Isolators; solar panels; pumps

  14. Product Guarantee Insurance • Covers injury or property damage from product failure to perform for intended purpose •  Might be in Public Liability policy

  15. Case study 1 • Contractual liability • from indemnities • other events – e.g. damage from weather • Very common • Rarely insurable

  16. Case study 2 • 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

  17. Conclusion • 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

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