Are all Sub-contractors covered in a Public Liability Policy?

A sub-contractor is an independent third party who provides a service on behalf of an Insured.  Sub-contractors generally specialise on one particular service, and an Insured may engage several different sub-contractors as part of their overall offering to their customers. An Insured may also engage independent third parties to provide services to their business, but these parties are not necessarily considered to be sub-contractors. So what’s the difference?

What is a sub-contractor?

Let’s use the example of a cartage contractor who has direct employees who drive the Insured’s own trucks, as well as third party contract drivers. As the third party drivers are performing activities consistent with the main service offering of the Insured, they are considered to be true sub-contractors. Because they are completing this work for the Insured’s customers on Insured’s behalf, the Insured could potentially be held vicariously liable for that work, and they therefore should be declared to the Liability insurer.   

Who is considered an independent third party?

So when is an independent third party not a true sub-contractor? If we use the same example of the cartage contractor as our Insured, as well as sub-contractor drivers, they also engage an accountant to do their books and a mechanic to service their trucks. The accountant and mechanic are again independent third parties, but the work they perform is not part of the Insured’s service offering, and they are not performing work for the Insured’s customer on the Insured’s behalf. They are simply providing a service to the Insured’s business. These type of third parties do not need to be declared to the Liability insurer as they do not contribute to the Insured’s liability to third parties.  

Implications of using sub-contractors for public liability insurance

As discussed above, the Insured could potentially be held vicariously liable for work performed by the sub-contractors. For third party injury or damage caused by a sub-contractor, the Insured will generally be the one who receives a demand from that third party. The Liability Insurer may then be able to pass on some or all of the cost of that claim to the sub-contractors Insurer. This is why most Insurers require policy holders to attain some form of evidence that any sub-contractors they engage have their own liability insurance in place.

In addition to this, the Insured is also potentially liable for injuries sustained by the contractor in the performance of their work for the Insured. The sub-contractor may or may not be covered by their own workers’ compensation policy depending on the relevant state legislation. If they are not covered by a workers’ compensation policy for the injury, then they may claim directly against the Insured. If the sub-contractor is covered by a workers’ compensation policy, the Insured may still face a recovery action from the workers compensation Insurer if they are deemed to have contributed to the injury.

Don’t forget to declare sub-contractors on a public liability policy

where a sub-contractor is providing a service to the Insured’s customers on the Insured’s behalf, you must declare all sub-contractor payments to the insurer. You should also ensure that a sub-contractor has their own Public & Products Liability coverage.

The information and opinions contained in this document are general in nature. You should consider what insurance is appropriate for you or seek independent insurance advice.

A message from Steadfast - changes to our Landlords insurance product offering

The COVID-19 pandemic has been declared a catastrophe by the Insurance Council of Australia and decisions being made by all Governments is having a profound effect on our economy. One area being hit hard is the domestic rental market and understandably, we have seen a spike in landlords taking out rent-default cover due to the financial distress expected to be experienced by renters and Landlords alike.
 
Considering the current circumstances and the associated uncertainty it creates, both IAL and Hollard have made the difficult decision to temporarily suspend the Rent Default optional benefit for any new business, as well as for any new endorsements to existing policies. This came into effect on 27 March 2020 for Hollard and 28 March for IAL. Both IAL and Hollard will continue to offer Landlord Insurance without a Rent Default option.  
 
In respect to existing AIG policies, from 28 March, AIG will not be accepting any new endorsements for rent default covers.
 
In respect to renewals, IAL will continue to offer renewals and support existing cover. Hollard are assessing their approach in the coming days and will provide an update as the situation develops.
 
This was a difficult decision for all underwriters to make and is a similar approach to putting embargoes in place when bushfires are approaching. It will be reviewed as more information comes to light about how successful Government and community actions have been in dealing with the pandemic.
 
FAQ’s
 
Q. Will I be covered if the tenant loses their job and is no longer able to pay rent?
 
Our policy provides cover for tenant default irrespective of the cause, subject to all the terms and conditions of the policy.
 
Q. The policy requires the landlord to take all reasonable legal steps to remedy non-payment, is this still applicable?
 
We are reviewing this as it’s not completely clear given recent federal and state government measures to prevent tenant eviction. Decisions around financial hardship are expected soon. Once these have been published, we will be able to provide more concrete guidance. In the meantime, all claims will be assessed following our current procedures and are subject to the terms and conditions of the policy.
 
Q. What happens if I need to change the conditions of the lease agreement? 

It depends on the agreement made with the tenant:

• If the rent-payable amount is reduced, should the tenant default on payment, the policy would respond based on the latest rental, in this case the reduced rental amount. The difference between the original rent and the newly agreed reduced rent is not covered as this is an agreement made between the client and the tenant and is not a default. 

• If your client agrees with the tenant to stop collecting rental payments, the policy will not respond as it is an agreement made between the client and the tenant.

Please give us a call on (02) 8917 6988 if you have any questions regarding your insurance policy.

Coronavirus and travel insurance: are you covered? - by Alexi Demetriadi via Insurance Business Australia

With Italy’s cases of the COVID-19 coronavirus rising rapidly, and with the majority of Europe following suit, the global health crisis is showing no signs of slowing down. Iran continues to report cases while here in Australia the count is steadily going up. So, for those thinking of travelling, how will their plans and protection be affected?

Most travel insurance policies, while providing generally quite broad cover, tend not to respond to claims made in relation to epidemics or pandemics – which coronavirus will fall under. Finder, one of Australia’s largest price comparison websites, explained that “often, general travel insurance policies have an exclusion which restricts what you can claim in relation to epidemics or pandemics.” This does depend on individual insurers, however.

Price comparison site CHOICE similarly stated that many customers will find themselves left without protection because coronavirus is filed under pandemic for insurance purposes. But the site did note that “over half of insurers cover medical expenses resulting from a pandemic,” but that less than half of insurers cover cancellation expenses.

However, an industry expert explained that now the coronavirus has become a ‘known event’, it will become extremely difficult to get any sort of protection if a policy was taken out after late-January.

“When something like coronavirus becomes known, the insurers cut off cover,” CHOICE’S Jodi Bird explained. For the coronavirus, this ‘known event’ date is around January 23, when the World Health Organisation confirmed almost 600 cases of the virus across several countries.

CHOICE explained that once the coronavirus became a worldwide issue, it almost immediately became uninsurable.

“Insurance is intended to protect you against the unknown, so once an event becomes known, it’s usually too late to buy insurance to cover you for that specific event,” he said. “When, exactly, an event becomes ‘known’ is a grey area, but generally it’s when it’s publicised in the media or on official government websites.”

The only way to try and find cover for incidents related to the virus is to buy a new and more expensive add-on product, called ‘cancel-for-any-reason’ insurance. This is the only way to be assured of coverage for cancelling a trip due to fears of coronavirus. But it is likely to be very expensive due to the exclusive nature of the policy, and often does not cover medical or cancellation costs occurred while travelling.

This product can be obtained from major travel insurers such as Covermore.

Understanding Business Interruption - adapted from Ready for the Worst by Steven Chong

Business interruption (BI) insurance is one of the most vital policies a broker can place for a business of any size – yet it’s also one that is commonly overlooked or underinsured, particularly among smaller businesses.

CGU research of nearly 500 small businesses found that one in four would not survive if they had to close their doors for three months, and Vero’s Andrew Geldart reports that about half of businesses that suffer a total loss don’t resume trading, while about a third fail within three years without adequate BI cover.

“Business owners often underestimate the likely impact of an event,” says Philip Johnson, Zurich’s National Property Underwriter. “Most businesses that suffer a major fire but do not have BI insurance fail within a year or two. Following a catastrophe event such as a major storm, flood or earthquake, the incidence of businesses failing is even greater. It takes a while for the evidence of this to be fully apparent as uninsured businesses will strive to work through the problem.”

CATEGORIES OF BI

Johnson and Geldart say that BI most commonly comes as Gross Profit because it suits any business with variable expenses that produces or sells merchandise, and typically covers two aspects:

1. Reduction in turnover less the uninsured working expenses, and
2. Expenses increased beyond normal levels to maintain business operations, generally limited to the amount of gross profit saved by incurring the additional expense.

“Gross Profit is effectively the turnover of the business minus the expenses deemed to vary in proportion with a reduction in turnover,” says Johnson, and to determine its insurable value, the business expenses need to be split into those that would:

• reduce in proportion to a reduction in turnover (such as purchases or freight),
• continue unchanged regardless of turnover (contractual obligations), or
• partially reduce if turnover reduced (eg salaries and payroll).

However, Prof Manning points out that some insurers call their traditional insurable gross profit ‘Gross Revenue’ to avoid confusion
between accounting gross profit and insurable gross profit.

Gross Revenue cover is appropriate where business expenses are fixed and don’t vary directly with sales, such as professional services like accountancy, architecture and financial planning firms, says Geldart. To calculate it, any expense normally paid out of the firm’s revenue that ceases or reduces due to the event are deducted, says Prof Manning.

Gross Rentals insurance is similar to Gross Revenue but the wording has been adapted to respond to a loss of rental income for a property owner or landlord. It should also include the outgoings paid by the tenant such as rates, water and insurance, adds Prof Manning.

“It is called Gross Rentals because insurable Gross Profit insures the revenue of the business less any expenses that are either defined in the policy or listed on the policy schedule. Such expenses should always be expenses that are truly variable to sales with the variation occurring in direct proportion to sales,” Prof Manning told IRP.

“For Gross Rentals or Gross Revenue, there is no need to consider the cost of goods sold or uninsured expenses – the full rental or revenue value is insurable,” says Johnson. He adds that when calculating values or sums insured, the possibility of a loss on the last day of the policy should be considered, which will usually be at least 12 months later. The required sum insured should include allowances for business trends for the full indemnity period starting from that day.”

DETERMINING GROSS PROFIT

Insurable Gross Profit should not be mistaken for the accounting Gross Profit.

Insurable Gross Profit typically includes fixed expenses and overheads, payroll and net profit. To be fully insured under a BI policy, only those expenses that are truly variable in direct proportion to sales should be listed as an Uninsured Working Expense and NOT insured. In the case of setting Gross Profit figures, it is always better to overestimate because the Declared Values under an ISR policy are declarations, and as such are adjustable.

icare continues shake-up – QBE dropped - written by Jordan Lynn 28 Apr 2017

icare has continued its shake-up of the workers’ compensation market in New South Wales with the announcement of its claims service partners.

Earlier this week, it was announced that Allianz had been tapped to manage existing claims in a transitional capacity and icare has now revealed that EML will take on all new claims from January 2018.

Allianz will be joined by GIO in a transitional capacity, with QBE dropped by icare following a rigorous selection process.

“Both injured workers and NSW employers can expect to have a simplified, empathetic and consistent experience with our main claims partners moving forward,” John Nagle, icare group executive workers’ insurance said.

“In EML, GIO and Allianz we are confident we have selected claims partners with strong experience, expertise and qualifications in delivering customer-centric workers’ insurance services and outcomes for injured workers and employers, and the willingness and drive to further improve.”

Nagle noted that existing clients of icare may experience some changes over the coming months as they are transitioned to new insurers involved in the scheme.
Mark Coyne, EML CEO, said that the firm will look to continue the good work done by itself and other agents in the workers’ insurance scheme as the changes take shape.

“We are committed to working closely with icare and its partners in supporting icare’s vision to provide NSW business with choice, flexibility and easy-to-use options when it comes to their workers’ insurance,” Coyne said.

CGU announced that it would exit the workers’ compensation market in the state when its contract expires at the end of 2017.

QBE & CGU will both conclude their role as an icare scheme agent on December 31, 2017.

Courtesy Insurance Business Magazine

慳粒糖, 輸間廠 - 投保不足的誘惑與陷阱

很多客戶為降低成本, 都有減少投保額來節省保費這種想法。可是, 這是導致投保不足的最大誘惑｡ 減少投保額, 表面上好像節省點支出, 實際上, 這只是自欺欺人的做法｡ 保險報價單是保險顧問依照客戶所提供的資料制訂而成, 它是根據投保行業的性質, 工作環境, 受保障的資產值評估客觀存在的意外風險, 來計算出保險費｡ 並透過投保, 把意外風險的責任轉移到保險公司, 把不確定性損失(意外導致的損失) 轉變為確定性成本 (保費)｡ 因此, 減低保額只是節省

少許確定性成本(保費), 但當意外發生時, 因投保不足而要自己承擔巨額損失時, 便後悔莫及了｡

很多人都以為意外發生的機會很微而掉以輕心｡ 可是, “早知如始, 何必當初”的例子, 是屢見不鮮的｡ 所以, 在減少投保額前, 要先衡量當意外發生後, 你能否承擔損失?

特別一提, 若火險或營業中斷保險投保不足, 當意外發生後, 保險公司會以投保不足額的比例, 扣減賠償金額。例如: 你的火險投保額只有$100,000, 但你的財物的真正價值是$200,000. 若你的財物在火災中完全損毀, 保險公司只會賠給你$100,000 x 100,000 ÷ $200,000 = $50,000｡

此外, 商戶亦會不自覺地墮入投保不足的陷阱｡ 常見墮進陷阱的原因如下:

•建築成本上漲

材料價格及建築成本上漲, 加上新法例的推出, 導致廠房或店舖重建費用比預期高。

•購置先進機器及設備

購置較先進機器取代舊有設備時, 忘記提高保額。例如: 購置先進冷房設施取代舊式雪櫃。

•營業額增加

每年營業額增加, 卻忘記調整營業中斷保險的投保額。

•營業中斷保險賠償期的重要性

意外發生後需要多久才能恢復營業, 及回復意外發生前的營業額？有些因素是絕對不能忽略的, 例如: 重建工程展開前, 需要多少時間清理災埸; 草擬建築圖則及向政府伸請牌照等。一般行業在嚴重事故發生後到重新營業, 平均需時18至24個月。

避免投保不足的要訣!

•尋求專業意見及評估專家的估價。

•正確地估計你財物的價值及定期更新你的投保額。

•購置新設備或重新裝修時, 即時更改保額, 不要待續保時才更新投保額。

•防止意外的發生, 例如: 火災和偷竊, 確保你的廠房或店舖定期維修保養。

•最便宜的保單, 通常不能為您提供最合適的保障和提供最好的服務。

**想安枕無憂, 請立即聯絡本公司的保險顧問，商討你的商業保險**