Chartered Insurance Broker Status Renewed

When we were awarded the Chartered status in 2012, there were less than 100 firms in the UK with the sought after accreditation. Whilst the numbers have risen it is still the benchmark of quality in our profession with under 200 firms currently awarded the title.

We are delighted to confirm that our Chartered status has been renewed for the next 12 months and the Chartered Insurance Institute confirms “Chartered titles are jealously guarded by professional bodies and are not awarded lightly… The title Chartered Insurance Brokers is a public declaration that the advice given by your firm:

  • Is of the highest quality
  • Is based solely on the researched needs of the customer, and
  • Is provided by someone not exceeding their level of competency

 

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Why implementing GDPR could be a Positive Change

CNA Hardy’s Matt Sumpter offers an interesting perspective on GDPR:

There is no question that the forthcoming General Data Protection Regulation (GDPR) will bring with it big changes to organisations; enhancing existing data subject rights provided under the current EU Data Protection Directive as well as introducing new ones. But change is not necessarily a bad thing, and GDPR should be viewed as an opportunity rather than something to be feared.

Most organisations are already taking steps to prepare for the forthcoming legislation, however when examining the current commentary much of this preparation is seemingly focused only on the potential downsides rather than on leveraging the opportunity.

It is true that the focus on compliance around data collection and distribution that is at GDPR’s centre is being enforced by greater consequences than previously seen under the current Directive. However, the real intent of GDPR is not to generate fines but to create new behaviours around organisations approach to handling and processing personal data. In a world becoming more and more reliant on technology this should be viewed as a positive step forward.

An organisation’s ability to present evidence to regulators of its efforts to comply with GDPR will help reduce liability under Article 83 (General conditions for imposing administrative fines). Therefore it benefits an organisation to not just take measures to minimise potential consequences, but to embed an appropriate culture that embraces the principles of GDPR and enforce meaningful accompanying systems and controls.

There are six key principles governing the processing of personal data and implementing them should be a positive change for organisations. By better managing how data is used, organisations will be able to build greater trust and loyalty with their customers, which in turn should enhance their brand and the bottom line. Furthermore, this increase in trust and better management of the security of data will enable greater data sharing and better leveraging of Big Data, which will assist with product development and enhanced customer experience.

The six key principles are:

Lawfulness, fairness and transparency: the processing of personal data should follow regulation.

Purpose limitation: organisations should only collect personal data for specific, explicit and legitimate purposes.

Data minimisation: personal data should be adequate, relevant and limited to what is necessary for the purpose of processing.

Accuracy: personal data must be accurate and kept up-to-date, and corrected or deleted without delay when inaccurate.

Storage limitation: organisations must keep personal data in identifiable form only for as long as necessary to fulfil the purposes it was collected for.

Integrity and confidentiality: personal data must be secured by appropriate technical and organisational measures against unauthorised and unlawful processing, and against accidental loss, destruction or damage.

Organisations should think of GDPR in terms of the rights it grants their customers and the benefits that may flow from the trust that will build from it rather than just the potential threat it poses to them. By embracing GDPR’s principles, both organisations and customers alike have a lot to gain.

Credit:

Matt Sumpter, Underwriting Director for Technology and Cyber Risks

CNA Hardy

Click here for original link

 

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Charity Bike Ride in aid of ‘CRY’

Well done to John Grindley & the rest of the Luke Moss team for completing a gruelling 43 miles (with an elevation of 4100 feet!!!) charity bike ride on the Isle of Man the 16th September.

 

Standard Of Care In Construction Contracts

When a professional consultant or design and build contractor enters into contract, its focus will be on establishing key terms central to any commercial arrangement, such as the scope of work and payment terms.

Along with these are terms which describe the required standard of care to which the relevant services are subject. It is against these terms that delivery will ultimately be assessed and, if a dispute arises, these will set the bar when establishing whether there has been a breach. However, despite the potentially significant implications which accompany these terms, they are often overlooked, until an issue arises.

This note explains the different standards of care which can apply and flags key points to look out for.

What is a standard of care?

The standard of care is the degree of care and caution which a professional consultant / design and build contractor must exercise when undertaking its services. It effectively sets a benchmark for the quality of services to be provided.

There are two types of standard of care which are explained below:

  • Reasonable skill and care
  • Fitness for purpose

Reasonable skill and care

In the UK construction industry, reasonable skill and care obligations are usual. To the extent a consultant / contractor can demonstrate that it acted with reasonable skill and care when undertaking its services, it will not be in breach of its obligations. What constitutes reasonable skill and care in a given situation will be assessed against how a reasonable consultant / contractor in the same professional field would have acted.

In the absence of express provision within the parties’ contract, a duty to act with reasonable skill and care will be implied (by virtue of s.13 Supply of Goods and Services Act 1982). It is, however, usual that the contract will address this expressly. 　By way of an example, the standard NEC3 Professional Services Contract provides that:

“The Consultant’s obligation is to use the skill and care normally used by professionals providing services similar to the services” (clause 21.1).

Similar wording is used in the JCT Design and Build standard form of contract. Such provisions reflect the common law test for negligence. A party will not be found to have been negligent if it has carried out its services to the same standard that another reasonably competent member of its profession would have met. This was confirmed in the case of Bolam -v- Friern Hospital Management Committee [1957] 1 WLR. With that in mind, independent expert evidence is required to support allegations of professional negligence.

Fitness for purpose

This requires that when the project has been completed it is fit for its intended use. Such an obligation is considerably more onerous than one requiring only reasonable skill and care. The consultant / contractor effectively guarantee that its design will be suitable for its intended use. It is rare for a contract or appointment to impose such an obligation.

Express wording will generally be required in order for a fitness for purpose obligation to be applied. 　Consultants / contractors should be careful, however, to ensure that no such obligation is implied into their contract. For example, where an employer makes clear that work is to be done to achieve a particular purpose, the work is of a kind that the relevant consultant / contractor holds itself out as performing, and it can be shown that the employer relied upon the skill and judgement of the consultant / contractor, there can be an implied warranty that the completed work would be fit for the notified required purpose.

In the case of Greaves & Co. -v- Baynham Meikle [1975] 1 WLR 1095 CA, structural engineers were appointed to design a warehouse floor which would be suitable for the use of stacker trucks. The floor failed, and the engineers were found liable for having breached an implied warranty that the floor would be reasonably fit for the purpose for which the engineers knew it was required.

Particular care should be taken when contracting under the NEC3 standard form. The core clauses require the contractor to provide its works in accordance with the Works Information. Whilst such an obligation does not expressly refer to fitness for purpose, it is acknowledged that this envisages the works will be designed so as to be suitable for their intended use. Consultants / contractors should be careful to select the relevant option requiring only the use of reasonable skill and care.

Particularly in cases where a fitness for purpose requirement is not expressed specifically in the contract, a consultant / contractor may be unaware that it is taking on extended obligations. The contract should be considered carefully as a whole.

Insurance implications

In addition to potentially extending a party’s obligations, and so its potential liabilities, the applicable standard of care can affect its ability to claim under its professional indemnity insurance policy, in the event an issue arises. It is common for policies to exclude from cover liabilities arising from onerous contractual provisions – i.e. a duty or obligation going beyond that which would otherwise be implied by common law or statute. The rationale behind this is that whilst an Insured can contract on whatever commercial terms it likes, Insurers should not be required to indemnify it for liabilities flowing from such consequent voluntary assumption of risk. A fitness for purpose obligation will fall squarely within this category.

Some professional indemnity insurance policies will exclude all cover on a project where a fitness for purpose obligation is imposed. Alternatively, cover might be limited to such losses as would have been suffered had the usual reasonable skill and care obligation applied, with the Insured liable to meet any additional exposure itself.

Parties should therefore be wary of taking on any fitness for purpose obligations in respect of their works or services.

In order to protect themselves as far as possible, professional consultants / design and build contractors should take reasonable steps including the following when entering into contracts:

  1. Ensure the contract expressly identifies the required standard of care, to avoid uncertainty and / or to avoid a potential situation in which a fitness for purpose obligation is implied.
  2. Be careful to avoid any contractual provisions which might be taken to impose – whether expressly or impliedl – any fitness for purpose obligation
  3. Require that the applicable standard of care is limited to reasonable skill and care (including by ensuring the correct option is selected when contracting under NEC3). If the employer pushes for fitness for purpose, endeavour to understand why that is required. Given the associated risk and the potential implications in terms of insurance cover, consider ultimately whether such an obligation imposes too great a risk and so would be a deal breaker.
  4. Establish the insurance position, by seeking to understand whether, and if so how, the policy would respond should a fitness for purpose obligation be accepted.
  5. If relevant design work is to be undertaken by a sub-consultant / sub-contractor, consider whether a collateral warranty should be obtained in favour of the employer. By then giving the employer a separate direct contractual right of recourse that may serve to deflect any claim (either in part or entirely).

Parties should be sure not to overlook standard of care requirements in favour of what might appear to be commercially more important contractual provisions. From a liability perspective, these should be at the very top of the contractual checklist.

Our market leading Construction offering includes

  • sections for Professional Indemnity, General Liability and Contractors All Risks
  • Management Liability policies
  • cover in respect of liabilities arising from collateral warranties, without limitation on the number of assignments
  • A collateral review service
  • Lines up to £10m
  • No risk of claims falling between Professional Indemnity and Liability policies
  • Notification of claims to one Insurer, reducing the risk of late notification issues

 

Credit:

Stephen McLellan – Associate

DAC Beachcroft LLP

 

 

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Ansvar Launch New Charity Insurance Products

Charity Protect has been developed for smaller or newly set-up charities, community interest companies social enterprises and not-for-profit organisations, that don’t carry out work abroad and have an annual income or turnover of up to £100,000.

The policy provides cover for public and products liability as well as various activities including fundraising events for up to 500 people, office and admin work and attendance of exhibitions, conferences and meetings to name a few. There are also other sections of cover which can be added if required, such as Legal Expenses, All Risks and Trustees and Directors indemnity.

Charity Protect Plus is their product for larger charities with an annual income or turnover of up to £1,500,000.

Like its sister product, this policy provides cover for public and products liability and a number of different activities including fundraising events for up to 1000 people, office and admin work and attendance of trade shows, seminars, the sales of second hand goods and other activities which benefit the charity. Again, there are additional sections that can be added to the policy including Professional Indemnity, Money and Employer’s Liability.

Call us on 01772 555585 for more information.

 

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NMU Launch new Computer Cyber Insurance

Cyber security has become a risk to all businesses

Today, virtually all businesses collect and store personal information about customers, employees and others. The frequency of data breaches – the theft, loss or mistaken release of private information, is on the rise. But data breaches aren’t just a big business problem; small and medium-sized businesses with fewer data security resources are particularly vulnerable.

Whilst data losses for small to medium-sized businesses may not make the headlines, the potential financial cost and reputational impact of a cyber incident can be crippling. Firms such as accountants and lawyers might be perceived to hold more sensitive data, but all businesses could be at risk from a cyber attack or data breach by hackers, viruses or errant employees. 74%* of small businesses having experienced a security breach.

In response to the growing demand for cyber insurance, NMU has added a computer, data and cyber policy to its suite of products. Specifically designed for small to medium-sized businesses, Computer Cyber Insurance offers broad coverage for cyber risks. Hardware (including portables) and data corruption cover provides protection for assets, whilst data breach expense, cyber crime, cyber liability and cyber event – loss of business income cover responds to cyber risks.

Policy benefits include:

  • Cover for the costs of dealing with data breaches and cyber liability claims
  • Cover for loss of business income from a cyber event
  • Cover that helps businesses deal with the impact of cyber crime
  • Cover for hardware and data corruption
  • Access to expert advice and support e.g. IT, legal, forensic and media relations when an incident occurs
  • Full claims support following an incident

Please get in touch with us 01772 555585 to discuss how this could affect your business and the protection available.

Professional Indemnity Insurance in Construction Contracts

What is Professional Indemnity Insurance?

PI provides cover for liabilities arising from professional negligence. Any consultant or contractor / sub-contractor (collectively, “Insureds”) with design responsibility or whose duties include a substantial design element will usually be contractually required to purchase PI. It may also provide cover for a range of other exposures:

  • Including defective surveying services
  • Project management and contract administration 　
  • Some policies may also offer limited cover against liability for pollution and contamination claims

 

PI cover is usually expected to be maintained throughout the entire period of the Insured’s potential liability under a contract or appointment. The level of cover required will generally be specified within the contract or appointment. 　The Insured will usually be required to produce evidence that PI of the required level is in place. Whilst the client will want the security of knowing there is adequate insurance to cover any claim which it might ultimately have, it is equally in the interests of the Insured to ensure adequate PI is in place from the outset. Not only would a failure to do so leave it in breach of contract (exposing it to a claim for damages), but, most significantly, inadequate insurance leaves it potentially exposed to uninsured claims.

 

Workmanship

PI is intended to cover negligent professional services. It will not generally cover defective workmanship or manual operations, unless specifically included within the definition of insured services and activities. In fact, such activities will often be the subject of express exclusions under a PI policy.

This is a fundamental feature of PI. There can be a fine distinction between workmanship and design when ascertaining what has caused a particular defect. Particularly in design and build situations, the contractor must bear in mind that, unless expressly provided for in its policy, pure workmanship issues for which it may be liable will not be covered.

Standard of care

This is the degree of care and caution that an Insured must exercise under its contract.　 This sets a benchmark for the quality of services which the Insured must provide.

The standard of care will either be ‘reasonable skill and care’, or otherwise ‘fitness for purpose’. The former sets a lower benchmark and requires the use of only reasonable skill and care when performing services.　 Fitness for purpose, on the other hand, means that, once completed, the project will be fit for its intended use. This is a higher standard because the Insured effectively guarantees that its design will be suitable for the project’s intended use.

Importantly, an Insured which agrees to a fitness for purpose obligation may have difficulties recovering under its PI policy, even if it has acted negligently. Some PI policies will expressly exclude all cover on a project where a fitness for purpose obligation is imposed. With that in mind in particular, Insureds should be very careful before signing up to such an onerous standard of care.

 

Onerous contract terms

As with all commercial arrangements, strength of bargaining position plays a key role when negotiating contracts. Important and influential clients will often seek to impose onerous contractual requirements in recognition of wider commercial opportunities.

PII policies will often exclude from cover losses arising from onerous contract terms to the extent the associated liability exceeds what would otherwise have been the party’s liability at law. The rationale behind that is that whilst an Insured can contract on whatever commercial terms it likes, Insurers should not be required to indemnify it for liabilities flowing from such consequent voluntary assumption of risk.

A common example of this is contractual Liquidated and Ascertained Damages (“LADs”), which are a common feature of construction contracts. These are a purely contractual remedy, not being a measure of actual loss or damage. An Insured’s liability for LADs is not typically covered under PI policies.

 

Novation

Novation agreements are common in construction projects.　A novation is a tripartite agreement by which an existing contract between A and B is discharged and a new contract is made between A and C, usually on the same terms as the first.

For example, a developer will commonly engage an architect to assist at planning and / or tender stage. If entering into a design and build arrangement, the contract may require that the architect (and potentially other members of the developer’s professional team) is novated to the design and build contractor – i.e. the contractor will enter into a direct appointment with the architect, supplanting the former contract between the architect and developer. The architect will then, as a result, take on responsibility to the design and build contractor for its design, including for work already undertaken for the developer (depending upon the precise wording of the novation). The design and build contractor takes on ultimate design liability to the developer.

PI policies will often require design and build contractors, as a condition to cover being provided, to take reasonable steps to satisfy themselves of the capabilities of the novated consultant and the adequacy of the design for which they take on liability. This can require interrogation of the design, potentially through an independent third party consultant.

 

Collateral warranties

Defective design of an Insured could cause different losses to parties with differing interests in a construction project.　A collateral warranty is a contract between a party with an interest in the project and a separate party involved in the project’s design, management or construction. The Insured usually warrants to the interested third party that it has complied with its appointment or contract, giving that third party a direct contractual route to recovery against it in the event of a claim.

PI policies can include strict requirements in relation to collateral warranties. They will often extend cover to collateral warranties only where the effect of the warranty is not to make the Insured liable to any greater degree than would otherwise have been the case under its original appointment. The contractual / statutory limitation period during which the Insured may be liable for any breach of its contractual obligations is a good example of this issue in practice. The warranty should not have the effect of extending the limitation period beyond that which would otherwise apply to the contract.

 

Notification

As with all liability covers, PI policies usually include strict obligations to notify insurers if and when a claim or circumstance arises. Given the fast-moving and often contentious nature of construction projects, Insured parties should ensure they are familiar with the precise notification requirements under their policy and that they at all times comply with them.

A particular feature of construction contracts is Adjudication, which is a short-form dispute resolution mechanism specific to the construction industry. This process operates in extremely tight timescales, and can produce a binding decision within as little as 28 days. PI policies will often (necessarily) contain substantially shortened notification requirements where a Notice of Adjudication is received. Insureds should pay particular attention to those, as they will need to act quickly – often as a condition to cover being provided under their policy.

 

Credit:

Stephen McLellan – Associate

DAC Beachcroft LLP

Car Insurance Premiums set to rise

Average car insurance premiums could increase by up to £75 a year as a result of a government ruling, industry experts have said.

A new formula for calculating compensation payments for those who suffer long-term injuries has been announced by the Ministry of Justice.

But the Association of British Insurers (ABI) called the decision “crazy”.

The Ministry of Justice said it had no choice under the current law, and said it would consult on possible changes.

Shares in insurance companies fell, with some saying that profits would be hit by millions of pounds.

The change is due to take effect from 20 March.

How compensation works

Accident victims are paid compensation in a single lump sum, which in serious cases is supposed to support them for the rest of their lives.

But someone who is awarded, say £100,000, can actually increase that amount by investing it, and getting a cash return.

So to be fair to insurance companies, the payout is reduced accordingly.

For the past 16 years the discount rate, as it is called, has been set 2.5%. So a compensation payment of £100,000, for a notional one year award, would have been cut to £97,500.

Now the Ministry of Justice has decided to reduce the discount rate from 2.5% to minus 0.75%.

That would put the compensation payment at £100,750 – meaning more money for the victim, but a higher cost for the insurer.

The change was ordered because the formula assumes the victim were to invest his or her money in government bonds.

By the time inflation is taken into account, real returns on such bonds have become negative.

‘£1,000 increase’

Reducing the discount rate to minus 0.75% was a “crazy decision”, said Huw Evans, director-general of the Association of British Insurers (ABI).

“Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK,” he said.

“We estimate that up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year.”

Image copyright Getty Images Image caption The change will mean accident victims are likely to receive higher pay-outs

Experts said higher insurance premiums could cost drivers under the age of 22 up to £1,000 a year.

“We anticipate an increase of £50-£75 on an average comprehensive motor insurance policy, with higher increases for younger and older drivers – potentially up to £1,000 for younger drivers, and a rise of up to £300 for older drivers,” said Mohammad Khan, UK general insurance leader at accountancy firm PwC.

Older drivers includes anyone over the age of 65.

However, accident victims are set to benefit as they will receive higher pay-outs.

Lawyers who had campaigned in favour of the changes welcomed the news.

“People already coping with the most severe injuries have been deprived of the help and care they need for years,” said the Association of Personal Injury Lawyers.

Consultation

A number of insurance companies said their finances would be hit as a result of the changes.

Direct Line said it expected its pre-tax profits to be reduced by as much as £230m.

Where negligence claims are made against the NHS, the bill could rise by £1bn, the Treasury said.

But the NHS Litigation Authority will be compensated for any extra cost, the government promised.

The Ministry of Justice will now launch a consultation on how the system can be made fairer.

It said it would bring forward any necessary legislation “at an early stage”.

In the meantime, it has made it clear it had no choice but to change the discount rate, according to the existing law.

“The law is absolutely clear – as Lord Chancellor, I must make sure the right rate is set to compensate claimants,” said Liz Truss, the Lord Chancellor and Justice Secretary.

“I am clear that this is the only legally acceptable rate I can set.”

Garratts sponsoring PNE

Big Sam Allardyce, ex England manager, and Gary Brazil lead out Preston North End in 1986/87 wearing the seasons kit sponsored by Garratts Insurance Brokers.