This week’s product recalls include:
Mitsubishi Motors Australia Ltd — CF Lancer, ASX and ZK Outlander with continuously variable transmission (CVT)
Visit Product Safety Australia for more information.
This week’s product recalls include:
Visit Product Safety Australia for more information.
Over the past week I have had two similar questions on how to name the landlord on a policy of insurance where the tenant is required under the lease to arrange the insurance.
Before I answer this particular question, I would like to share my views on the approach by landlords to not just have the tenant pay for the building insurance but arrange it.
To say I really do not like this approach is an understatement.
The idea came about under the guise of risk management. The typically larger organisation, often on the advice of their legal department or external legal advisers, seeking to transfer risk from their organisation onto someone else.
Having been involved in many claims where this arrangement has been in place, I have grave concerns for both the tenant and the landlord with it.
The major concern for the tenant is if the lease requires that the building be insured for full value. This pushes the risk of under-insurance onto the tenant which can create a genuine personal risk.
I would always have the landlord confirm the sum insured is adequate to try and avoid this issue.
Still on the adequacy of the insurance, if the building, typically a big value item, is under insured under an Industrial Special Risks Policy (“ISR”) it could adversely affect a claim for contents or stock for the tenant due to the application of the co-insurance clause which under an ISR Policy or some quality business pack policies is tested against all assets at the “situation and/or premises”.
Another question is, who is responsible for the policy excess/deductible in the event of a claim under the policy? This is rarely spelt out anywhere and often leads to disputes particularly if there is damage to both building and contents. Is this just another hidden risk the tenant is taking on?
In one claim I am involved in all the proceeds of the claim went to the landlord and the landlord is “slow” to pay over the amount owing to the tenant. This was due to a mistake but the insurer has walked away from the problem forcing the tenant to take legal action against the landlord, insurer, loss adjuster and broker involved. How long this will take to sort out I am not sure but it has of course left the tenant in a terrible financial position without funds to reinstate their business and now forced to fund the litigation.
Turning now to the landlord/property owner.
The whole idea of the landlord abrogating the insurance protection to the tenant is quite frankly stupid. When it is not their property, most tenants seek out the cheapest possible cover without thought of the quality of the coverage or claims service. Where does this leave the landlord who typically has no relationship with either the insurer or the broker who arranged the insurance?
Flood is just one area where consideration needs to be given as to the extent of coverage required for the particular building.
Who ensures that the insurance is paid each year and that that sum insured/limit of liability, sub-limits for things like removal of debris, extra costs of reinstatement etc are reviewed regularly and are correct?
If there is a dispute between the landlord and the tenant who is there to look after the interests of the landlord?
I have seen far too many landlords, including solicitors who were the landlords themselves be left out of pocket after a fire as a result.
You can have all the directors guarantees in the world but if the tenant(s) has no funds they have no funds so the risk goes back to the landlord.
What of the loss of rent. Most landlords forget this. If they do think of it, most leases stipulate 12 months cover. This is often completely inadequate.
I spoke early about risk transfer. The best way to transfer risk is not to the tenant but to an insurer. That is their role in the economy and in society. To my mind it is far better for the landlord to manage the insurance on the building themselves, get the cover both in sums insured and extent of coverage right based on the risk and their appetite (not the tenants) and sleep well at night.
There is always an exception to the rule.
If the landlord is relatively small and the tenant is a huge corporation with a world class insurance program with every bell and whistle known to insurance and the landlord trusts the integrity of the tenant and their insurer, risk manager and legal department to do the right thing by them and not just walk away and leave them high and dry to deal with the insurer without the benefit of their own broker working for them, then yes it may be in order to allow the tenant to arrange the insurance.
For me, with any asset. I have had to work damn hard to get it and I am not going to take the risk and abrogate the most important contract protecting my financial future, that is the insurance contract, to anyone else other than my own broker, whom I trust and myself.
Now to answer the specific question
If the insurance is to be arranged this way then the policy needs to show all the legal entities involved as named insureds but for “their respective rights and interests”.
This weeks announced recalls are as follows:
This month sees the 5th anniversary of this blog with now over 850 articles published.
I would like to thank all the readers and particularly those that share the articles and/or pose questions and comments. It remains a privilege to share my thoughts, research and knowledge with such a wide and diverse audience.
Two things stand out.
The blog has also encouraged my son to start becoming a vlogger or video blogger through his series on YouTube called Insurance Bites. He publishes a new video with the help of LMI Media’s Andrew Pitts each Wednesday. If you have not visited the site I encourage you to do so.
I do get a great number of requests for a guest post and while I do permit and encourage this, I do vet the content carefully to ensure it is not a product flog and that the topic is of relevance to the majority of readers in the countries where the bulk of the readership is.
The old site was looking a bit dated so the site www.allanmanning.com has had a refresh.
A very warm thank you to Ashleigh White, Executive Assistant for your work on this.
I received this question from an insured who is concerned about the Fire Services Levy, to be correct the Emergency Services Levy. I have withheld the name of the insurer as is my normal practice.
I received my home and contents insurance renewal for a policy dated 7/11/16. The Financial Services Levy (“FSL”) included was $181.85 (estimated by [my insurer]). Along with a letter explaining that the FSL would cease on 1/7/17 and be paid with your Council rates. Compared to last year, the FSL had increased by 23% and if charged, would actually for the period up to 1/7/17 where it would be abolished, it had increased 85%. My premium had not changed materially.
I called [my insurer] to query why the FSL had increased and was told it was a Government charge and they just pass it on. The percentage rate used by [my insurer] in 2015/16 was 18% and 2016/17 it had increased to 23%.
I was told to contact the Department of Fair Trading insurance monitor, which I did and was told that there had been no increase in the FSL rates and that the insurance company set their rates.
I called [my insurer] back and said I thought the increase was excessive and was again told that it was a Government charge. But also that the $181.95 may be for the whole period of the policy to 7/11/17 and not pro rated. I said that this means that not only have [my insurer] increased the premium but also that they were going generate extra profits but not passing on the savings for the period after 1/7/17.
The call centre and their supervisor could not provide any better explanation.
I have passed my complaint onto the Insurance Monitor DFT, but wonder how many other customers have simply paid the increased FSL without questioning the huge increase in charges.
Peter [surname and email provided]
I replied as follows:
The whole system is quite complex and I feel that the transition which should have been handled as you suggest as a sliding scale on a pro-rata basis has not been followed by the NSW Government as it was with all the other main land states, except Victoria.
I see that the base premium went slightly up from your email but if that went down the amount insurers have to pay as a proportion of the premium has to go up. The amount each insurer pays is also based on the market share of each insurer.
As I say it is a very complex issue and I cannot work out the correct amount that should be charged/paid without an extraordinary amount of additional data.
It would be prudent, I feel, if Insurers did provide some basic training to their call centre supervisors on the makeup of the charge so that you did not have to play telephone tennis ringing back and forward as you have done.
What I would strongly suspect is that insurers will a) not want to be fined nor b) have their reputation damaged therefore they will be as accurate as possible on the amount of the levy charged and if anything be conservative.
Clearly you are concerned and by reporting your concern to the official monitor I am sure the matter will be reviewed and any adjustments that may be necessary will be done.
From my own perspective, as someone who has property in New South Wales, I will be glad when the whole transition is over with and the charges are collected through rates as then everyone in the community who benefits from the emergency services helps fund it and not just people like you and I who are prudent and risk averse and take out insurance. With around 1 in 4 homes and units not having contents insurance, for example, the current way of collection is clearly not fair.
Thanks for sharing your concern. The good news is that this will be the last year of it being linked to your insurance.
Following my post last week, I had several people write to me and I conducted my own additional research. Thanks to Brokers Ron and Gary and Gary’s client for their contribution.
It appears that the governments in both India and China do not recognise chrysotile (white asbestos) as being harmful, so in those countries only products containing amosite (brown asbestos) or crocidolite (blue asbestos) are classified as asbestos bearing materials.
It seems that among the many chrysotile containing materials being imported from those countries automobiles pose one of the greatest problems with their asbestos brake shoes and gaskets.
In the past, motor mechanics formed a large proportion of employees contracting asbestos related diseases as a result of “blowing out” with compressed air brake drums & discs. Equally distressing was the fact that many wives of mechanics also contracted, and in some cases died, from asbestos related diseases simply by washing their husband’s contaminated overalls/clothing.
The concept that I put forward in my earlier blog that 5% asbestos content was considered as “asbestos free” dates back a lot further than I first appreciated and I know believe it goes back to the mid to late 1970’s when I understand that Japanese Industrial Standards (JIS) allowed this.
Many companies including some government departments were said to have been caught with parts they could not use due to this problem.
The penalties for a company and/or an individual that imports products containing asbestos are quite severe. If you add this to the fact the importer will not have cover for any claims for injury caused by asbestos creates an enormous risk for the directors of any company that is involved in the importation of such products.
I end with a link to a brochure from the Australian Border Force on the issue. Please share it with any of your clients that could be involved in the importation of any product that may contain asbestos. This includes building materials, crayons, and mechanical / automobile parts. asbestos-australian-border-control-managing-the-risk-of-asbestos-at-the-border