Contracts – Insurance considerations

No.  QGIF is a self-insurance scheme for Queensland Government agencies and not a licensed insurer.  In most instances all that is required is a modification to the relevant clause to clarify that the Agency places insurance via the State’s self-insurer, the Queensland Government Insurance Fund (QGIF).

Public liability insurance provided by QGIF is unlimited.  For information specific to your Agency’s cover, please refer to your Agency’s Insurance Certificate, together with QGIF’s Insurance Policy – Statement of Cover.  Should you have any further questions, please don’t hesitate to call 07 3035 6367 or send us an email.

An insurance clause is often found in a contract and stipulates the type and extent of cover required.

It is prudent risk management when contracting with another party to stipulate in the contract that each party is required to have their own insurance coverage.  This ensures the other party, contractor or supplier is more likely to be able to meet its financial and legal obligations.

Agencies should undertake their own risk analysis and seek legal advice as to the type and extent of cover required and the appropriate limit of liability.  At a minimum, QGIF suggests each party should have public liability cover with a limit of $20 million.  However, in certain circumstances, lower or higher limits may be necessary.

Depending on the nature of the activity being undertaken or service being provided, professional indemnity insurance may also be prudent, particularly where the Agency may be relying on the other party to the contract to provide professional advice, scientific expertise or training etc.

No. Being a self-insurance scheme for Queensland Government agencies, QGIF cannot insure any non-government entities including their employees, contractors, sub-contractors, suppliers or agents.

An indemnity clause is a means of transferring the legal liability risk from one party to another.  Essentially, such a clause provides for one party agreeing to take responsibility for any loss or damage or legal liability incurred by another party.

Ideally, an indemnity clause should closely align with the position at common law i.e. each party is responsible for their own actions or omissions.  Where an Agency has contractually agreed to indemnify a party beyond the common law position, QGIF will not extend its indemnity of the Agency to meet the contractual indemnity in the contract.

We strongly recommend Agencies seek legal advice to ensure they fully understand the legal and financial implications of the entire contract, including any indemnity provisions.

Further information is available from Crown Law – Understanding indemnity clauses.

QGIF will not cover an Agency for an indemnity that extends to another party’s actions or omissions, nor does QGIF cover breach of contract.

You should seek legal advice before agreeing to grant an indemnity as doing so may extend the liabilities of your Agency beyond that which may be covered by QGIF.

It is a provision in a contract whereby one party agrees to waive subrogation rights against the other party in the event of a loss.  In the insurance context, subrogation allows QGIF, as the insurer, ‘to stand in the shoes of the insured Agency’ and to exercise the rights an insured Agency may have against third parties.

It is important to ensure your Agency’s subrogation (i.e. recovery rights) are not waived under the contract as this may limit QGIF’s (and thereby the State’s) ability to recover costs from a liable party.

It is not uncommon for a party to seek to limit their liability in a contract by placing a monetary limit on the liability that party would otherwise have at common law.  This is often referred to as ‘capping liability’ or ‘capping indemnity’.  Sometimes the ‘cap’ may align with the contract value.

QGIF does not consider that it is in the best interests of an agency to agree to such requests because capping liability can have the effect of transferring to the agency, risk that is not inherently its own.

Should there be compelling reasons for the insured agency to limit or agree to limit the other party’s liability, there should be no capping on personal injury and property damage and we suggest that any capping on other exposures be no less than the limit of liability stipulated under the ‘insurance clause’.  Set out below are exceptions to limitation of liability and exclusion of Consequential Loss:

The cap on liability in clause xxx and the exclusion of liability for Consequential Loss in clause xxx, does not apply to any liability arising out of or in connection with:

a)    loss of or damage to third party property

b)    death or injury to any person

c)    infringement or alleged infringement of any intellectual property rights        or moral rights

d)    fraud or wilful misconduct; or

e)    a risk, event or circumstance covered under a policy of insurance that        the Contractor is required to effect and maintain under this letter                agreement, in which case the Contractor’s liability to the                          Principal in connection with such risk, event or circumstance is limited        to the amount recoverable under such policy of insurance (plus the            amount of any deductible) or, if greater, the amount that would have          been recoverable under such policy of insurance if the Contractor had          complied with its obligations under this Contract to effect and maintain        such policy of insurance and its obligations under such policy of                insurance.

A risk assessment may assist in determining the appropriateness of the proposed cap.

You should exercise caution before agreeing to such a provision and seek legal advice on the risks and implications for your Agency.

No, you will need to contact WorkCover directly for information and advice regarding workers’ compensation insurance.