Blog Question: Territorial Limits under a Combined General Liability (CGL) policy

I received this question overnight.


Hi Allan

I follow you on LinkedIn and find your articles very informative and whilst I’ve never had to ask you a specific question I’m hoping you may be able to shed some light on the following.

I have a client who imports Underground Conveyor Chain Equipment used in Underground Coal Mines from the USA and my concern is regarding the General Liability Insurance territorial limits which excludes the USA.

I’m currently remarketing this account and the new insurer has advised as the insured is Importing (not Exporting) there is no issue regarding the territorial limits although these would remain as “Worldwide Excluding USA and Canada”.

My concern was if the insured imports something from USA which causes injury or damage and the insurer tries to blame the manufacturer however I’ve been advised the claim by a third party would be against the insured not the manufacturer.

If you could please provide your thoughts on this issue it would be greatly appreciated.   


Mark [surname and email provided]

My response was:

Hi Mark

Thanks for your note.

As I see it, I agree with the underwriter. Under current Australian law, the Insured is deemed to be the manufacturer when they import the product. [Competition and Consumer Act 2010 (previously the Trade Practices Act 1974)]

If the product in turn is only being used on Australian mines (or anywhere that the territorial limits apply then the cover you have in place will, subject to the limits,  terms, conditions, and exclusions of the policy, protect the Insured.

What I am saying is that the territorial limits apply to the location of the loss, damage or injury not the point where the product is manufactured.

After the Insured has been fully indemnified, the issue of the origin of the product then becomes an issue when there is a recovery to be made and I would have thought that it would be better and easier for the insurer using their right of subrogation to achieve a recovery from a US company over say a supplier from say China, India or Indonesia or other countries with significantly different laws and regulations than Australia.

I hope this helps and puts your mind at rest.



Read Me View comments

When will we learn?

I watched in disbelief the television news of a fire in Russia where 64 people were killed. It is reported that some doors were locked or barred.

Over the past few years, I have been researching fires in New York (The Green Triangle Shirt Factory, 1911), Chicago (the Iroquois Theater, 1903) and Singapore (Robinson Department Store, 1972) where similar circumstances led to legislation making it illegal to have fire doors locked, and not to have sufficient and adequate fire escapes, outward opening doors to all public buildings, and safety regulations around lifts.

Surely in the 21st century these should be world-wide regulations not to mention mandatory laws around sprinkler systems in public buildings such as the one involved here which looks from the photographs reasonably modern.

Even where we have regulations I often see fire escapes chocked open or stock or rubbish piled up in fire stairs or blocking fire doors.

Unlike the US cases where no one was convicted of an offence despite clear evidence they should have been, I hope there is an open and thorough investigation following this loss and if fire regulations have been breached that severe penalties are applied.

Meanwhile, it is a stark reminder that fire safety, and risk management in general, are an important issue for any employer and or organisation that invites the public onto their property.

Working cover of upcoming book on 6 crises that hit Chicago.

The research I carried out on the Iroquois Theater fire in Chicago in particular I found extremely interesting and heart wrenching at the same time. Over 600 people perished in an over crowded theatre which had unfinished fire escapes, locked doors and inward opening doors. It is one of 6 events in Chicago that I have been researching with my daughter Susan. In the upcoming book, Lessons Learned from the Great City of Chicago, we look at the lessons learned from a risk management perspective, the part insurance played and some tough psychological questions that flow from such tragic events. If we can stop one such tragedy reoccurring it will be worth all the effort we put into the research.



Read Me View comments

Product Recalls Australia – 27 March 2018

This week’s product recalls includes:

Read Me View comments

Address at the ASIC annual forum by the Hon Kelly O’Dwyer MP

With many of us concerned about the loss of trust in the insurance industry by the public, the increasing number of complaints and some of the practices being adopted I thought I would share the address by the Hon. Kelly O’Dwyer MP in her role as Minister for Revenue and Financial Services at the ASIC Annual Forum on 19 March.

I have marked in red the areas that I particularly found of interest.

Check against delivery

Thank you, it’s a pleasure to welcome you to the Australian Securities and Investments Commission (ASIC) Annual Forum.

This is the first time I have officially shared a public forum with the new chair of ASIC since the announcement of his appointment late last year, and I want to congratulate James Shipton on his new role.

Some of you might know that James and I share a fairly quirky heritage in that James’ father, Roger Shipton, was a former Member for Higgins, and I am the current Member for Higgins.

However, we had never met until he was headhunted for this role from the United States.

I am sure James will bring to this important job his considerable experience in corporate regulation, both as a practitioner and in academia, as well as, as a regulator. His unique international perspectives in Europe, Asia and the United States will be an asset.

ASIC has an incredibly important role in Australian business.

Australia’s reputation as a great place to invest, to set up business and to employ people, rests in no small part to the confidence we place in the work of our regulators, especially ASIC.

So it is fitting that the theme of this year’s ASIC Annual Forum is — ‘maintaining trust’.

This is because trust is fundamental to all our dealings in financial services, doing business and investing.

And maintaining trust requires constant vigilance.

It raises many questions — for financial professionals, for regulators, for the industry as a whole.

And the ‘maintaining trust’ theme also poses implications for the Government — ones that we are working hard to address.

So in my time today, I want to make some announcements relating to ASIC, as well as share some thoughts on recent developments and the Government’s priorities in the year ahead.

ASIC leadership

When it comes to the leadership of ASIC the Government strongly believes it’s crucial that the ASIC Commissioners have the right mix of skills, knowledge and experience.

As I mentioned, we have recognized that James Shipton brings a strong set of skills and international experience to the role of ASIC Chair.

And I would like to announce today that the Government also intends to create a second Deputy Chair position in ASIC to build on and strengthen ASIC’s leadership and give ASIC greater flexibility to administer their new powers and increased responsibilities resulting from recent law changes. 

This move will bring ASIC in line with its regulatory brethren at the Australian Competition and Consumer Commission (ACCC).

This important step will also support ASIC to engage more closely with its stakeholders and assist to better communicate its role, its priorities and how its resources are allocated.

I am currently seeking the required approvals under the Corporations Agreement with the States and Territories, and intend to introduce legislation to make the necessary amendments to the ASIC Act in the coming weeks.

I am also pleased to announce today the reappointment of ASIC’s current Deputy Chair, Mr Peter Kell, and also Commissioner John Price.

I want to thank them for their tremendous work to date, and I look forward to their continued contribution.

The Government will make an announcement regarding the new Deputy Chair on introduction of the legislation.

Statement of Expectations and Competition mandate

In line with the theme of ASIC’s leadership and future direction, it is with great pleasure that I announce the Government has settled on the new Statement of Expectations for ASIC.

The new Statement of Expectations acknowledges that ASIC, as the market conduct regulator, has the challenging task of balancing several objectives aimed at facilitating efficient capital markets and promoting trust and confidence in the financial system.

It reflects the notion that for ASIC to be a successful regulator, it will need to continue to have an open and sound working relationship with its regulated population and counterpart regulators.

It further recognizes how critical it is for ASIC to communicate its key decisions and regulatory outcomes to the public and demonstrate clearly how those decisions and outcomes align with ASIC’s legislative and strategic objectives. This is particularly essential now that ASIC is being funded by industry.

Competition mandate

The new Statement of Expectations will also reflect a new competition mandate for ASIC.

It is my belief that ultimately it is competition – not regulation – that is the best means of ensuring consumers get value for money in financial services.

I think that everyone agrees that both consumers and financial services providers — particularly new entrants — benefit from a more competitive financial system.

To this end, the Government will legislate to add consideration of competition to ASIC’s mandate, consistent with the Government’s response to another of the Financial System Inquiry recommendations.

This new mandate will require ASIC to consider the effect that its work and the exercise of its powers will have on competition in the financial system.

Including competition consideration in ASIC’s mandate complements other key initiatives undertaken by this Government to support competition.

This includes tasking the Productivity Commission to review competition in Australia’s financial system and funding the ACCC to undertake in-depth inquiries into specific financial system competition issues.

The Government looks forward to receiving ASIC’s response to the Statement of Expectations from its new Chairman.

As for recent developments in reforms, there’s plenty to discuss, but I’d like to focus on a few key items.

New financial adviser standards

Earlier last year, the Turnbull Government established the Financial Adviser Standards and Ethics Authority (FASEA) – a body comprising industry, consumer ethics and education experts – to raise the education, training and ethical standards of financial advisers.

Since the appointment of its CEO, Dr Deen Sanders, FASEA has been working hard to provide the industry with certainty on the new requirements.

I am pleased to note that shortly FASEA will be releasing new draft guidance on the education pathways for all existing advisers.

Under the proposal, existing financial advisers will need to undertake a relevant degree or one or more bridging courses, including a specific course on the Code of Ethics that will be developed by FASEA.

Advisers who have not previously undertaken a degree, or who have undertaken a degree that is not in a related field will need to reach degree-equivalent status.

And advisers who have previously completed a degree in a relevant discipline will need to complete between one and three bridging courses, to bring them up to date with current ethical and professional standards. Some advisers will need to complete additional study.

However, it is important to remember why these reforms are necessary – repeated instances of inappropriate or just plain bad advice has significantly eroded trust and confidence in the financial advice sector.

Every adviser has a role to play in rebuilding that trust, and these new educational requirements are a critical step towards professionalising the sector.

Ultimately, the professionalization of the advice sector will be in the best interests of all advisers, existing and new, because it will ensure enduring consumer trust and confidence in the financial advice sector.

The consultation on FASEA’s draft guidance will be open until the end of June this year. I encourage you all to participate.

Whistleblower protections

Now turning to protections for whistleblowers.

In the summer just gone, we introduced a Bill into Parliament to implement significant reforms to Australia’s whistle-blowing regime.

The Bill will provide stronger protections for insiders who break ranks and expose corporate misconduct and, for the first time, establish whistleblower protections for people who disclose information about tax misconduct.

The Parliamentary Joint Committee’s report on whistleblower protectionsmade 35 recommendations to strengthen Australia’s regime and I am pleased to say the Bill addresses the vast majority of those recommendations, and the Government is currently considering those that remain.

The new whistleblower Bill delivers on the Turnbull Government’s commitments in the 2016-17 Budget and as part of the Open Government Partnership – National Action Plan, to provide new protections to tax whistleblowers and to strengthen whistleblower protections in the corporate sector.

Under our Bill, a wider range of whistleblowers will be protected from a wider range of egregious conduct, and for those who do suffer reprisals or retaliation for blowing the whistle, the path to compensation will be simpler and easier.

And we are delivering a framework which will improve corporate governance practices and facilitate effective law enforcement.

Our Bill is a major step forward for whistleblowers in Australia, and we look forward to Labor and crossbench support for these critical reforms.

Financial products

This year the Government is also progressing reforms to address the mis-selling of unsuitable financial products to retail investors and consumers.

In December 2017, we invited comment on draft legislation for new design and distribution obligations for issuers and distributors, and a new product intervention power for ASIC.

The design and distribution obligations will ensure financial products are targeted and sold to the right consumers.

Now let me make clear from the outset, there is more work to do on these critical reforms. The feedback received from the last round of consultation raised a number of issues and the Government is carefully considering these.

When, and only when, these issues have been given full and deep consideration and after additional consultation  the legislative package be finalized and ready for introduction.

Under the new regime, firms will be required to identify the target market for their product, and will need to design the product for that market.

Further, both issuers and distributors will be required to take reasonable steps to ensure that products are distributed appropriately – that is, distributed to the target market only. These are significant reforms that will change the landscape for the sale and distribution of financial products in this country.

However, despite this, as many of would be aware these new obligations are not unprecedented – the reforms that commenced in the European Union in January this year also apply design and distribution obligations to product issuers.

To complement the new design and distribution obligations, ASIC will be given a new product intervention power.

This will give ASIC the power to intervene in the sale of a product, a product feature or practices related to the distribution of a product, in circumstances where ASIC perceives a risk of significant consumer detriment.

The products intervention power, like the design and distribution obligations, is also not unique globally.

The Financial Conduct Authority in the UK has for some time had the power to intervene in the sale and distribution of a financial product, if it is considered to be harmful to consumers.

And, the European Securities and Markets Authority has recently sought comment on proposed product intervention measures for their market.

The design and distribution obligations and the product intervention power are complementary and interconnected, and I am confident that together they will represent vastly improved consumer outcomes.

These reforms were recommended by David Murray in his 2014 Financial System Inquiry report, and the Government accepted those recommendations in full.


While I’m here, I’d also like to say a few words about the insurance industry as there are a few major developments on the horizon.

Life insurance report

At the end of this month, the Parliamentary Joint Committee is due to hand down a report into the life insurance industry.

Among the findings, I expect that the report will make recommendations on whether or not there is a need for further reform and improved oversight of the life insurance industry.

It will also focus on the sales practices of life insurers and brokers.

This report has long been awaited by the industry, government and indeed, many consumers.

Unfair contract terms

And, in the first half of this year, the Government will be consulting on changes to apply unfair contract term laws to life insurance contracts, as well as general insurance contracts.

This is in response to the Senate Committee report on the general insurance industry and the Australian Consumer Law Review.

While this will be a significant reform for industry, it is in the best interests of consumers and will bring the insurance industry into line with other financial services.

Mental health

Another issue, the insurance industry is currently contemplating with is claims for mental health related disabilities.

In October 2017, we saw the release of the Actuaries Institute Green Paper on mental health and insurance — a welcome development.

The paper highlights the large array of issues the insurance sector, and in particularly the life insurance sector, need to consider to support the large number of Australians who experience mental health conditions.

The list of issues includes things like definitions, data, rehabilitation and claims processing.

Given the incidence of mental health issues across the population, it is in the best interests of the community that the insurance industry, regulators and government work together to deal fairly and effectively with this issue.

I look forward to seeing further progress in this area.

Australian Financial Complaints Authority

Before I finish, I’d like to share some insights on the Australian Financial Complaints Authority (AFCA) — the new one-stop shop for all financial and superannuation disputes.

It will be landmark year for dispute resolution in Australia.

Parliament has passed legislation to establish the AFCA and we are currently putting in place the governance structure that will enable AFCA to start accepting disputes no later than 1 November 2018.

I recently announced that the inaugural Chair of the AFCA Board will be the Hon Helen Coonan.

And once a company is authorised to operate the AFCA scheme, I will make further appointments to the AFCA Board.

When the AFCA is up and running, consumers and small businesses will have access to free, fast and binding service to resolve all financial disputes.

The advantage of the new regime is that there will no longer be uncertainty, consumer confusion and cross-referral of disputes between dispute handling bodies.

Where a complaint covers multiple providers within the financial system, managing these complaints will be smoother under a one-stop shop.

What’s more, the AFCA scheme will also allow more small businesses to access external dispute resolution.

We have relaxed the definition of ‘small business’ so that in the case of a dispute related to a credit facility of less than $5 million, a business with fewer than 100 employees will be able to lodge a dispute with AFCA.

On top of that, AFCA will operate with significantly higher monetary limits than the existing external dispute resolution ombudsman schemes, so that those who have wrongfully suffered a loss will receive fair compensation.

We believe this will provide real outcomes for consumers and small businesses.

Closing remarks

Over the past 12 months there has been a lot of work done by the Turnbull Government in the regulatory space, and further work, as I have outlined, will continue this year.

Collectively, the initiatives that I have mentioned today will make a big difference.

They go to integrity and they go to transparent processes. And most importantly, they go to consumer trust.

We know that there is much to do.

However, it is at forums such as this where new ideas and experiences can be shared.

Our goal is not regulation for regulations sake.

Our goal is to provide the best regulatory structure for the free enterprise system to work as it should.

This will ensure that our country is seen as the best country in the world to invest in, and that our businesses and most of all our financial consumers can look forward to a prosperous future based on trust in that  regulatory framework. 

So, on that note, it is my pleasure to officially welcome you all to ASIC’s Annual Forum for 2018 and I look forward to your deliberations.

Thank you.

For my part I will continue to argue that builders, investigators and others handling claims are regulated so as they have at least a basic understanding of the fundamental principles of insurance, including the principle of Utmost Good Faith and understand the products that they are making decisions on coverage.

Read Me View comments

Are fines imposed on SME’s for data breaches fair?

As from 23rd February 2018 legislation now requires that Australian businesses report data breaches.

I have heard that there have already been an average of 10 notifications a week but this figure was on social media and I have not been able to verify the number.

I appreciate that we all have a duty to protect the personal data of our customers and employees but I question whether fines  imposed on any company that is breached is fair and reasonable.

Today the news is all abuzz about how Facebook was hacked. There have been reports of countless hacks of major international businesses and even sensitive government departments.

The issue is what is reasonable has been mulling around in my head for a while. It started last year, when LMI’s head of cyber security presented a board paper seeking an upgrade of our company’s security and seeking additional funding to cover the introduction of new software solutions. As we take cyber security very seriously all the recommendations were adopted and the capital expenditure approved.

A few weeks later I was meeting with a new client and in passing they advised that they had upgraded their security system and had spent exactly 50 times more than we had. Admittedly the client was an insurer with a much greater turnover, much larger customer data base and one would therefore think greater exposure. Having said this, the amount they had spent was greater than the gross profit of our organisation. As such it simply was not feasible for us to mirror their efforts.

Having said that, the same hacker could be targeting LMI as them and despite what to us was a significant expenditure I have to think we will be more vulnerable than the insurer.

I am also concerned about the number  of SME’s that are using the services of cloud based services such as Zero and MYOB’s new accounting systems. Employee data can be held here and the question is who would be fined if there was a breach of the cloud provider?

The other point that I would make is that after attending a number of conferences and hearing a number of computer security experts who carry out penetration testing, I am of the firm opinion everyone has been hacked but they have so much data already collected they have not used it as yet. The infographic at the end of the post shows the number of reported breaches during the first half of 2016, If you compare this to 2017 first half figures of 1,901,866,611 reported data breaches, you can see the massive increase (343%) in just one year.

The point to keep in mind is that in some countries, including Australia, during this period did not have to report breaches and so the figures are not complete.

With this background, I question is levying a fine on an organisation that has taken reasonable steps within their budgetary constraints fair and reasonable. Or is it just another form of hidden taxation on SME’s?

The reality is that reporting of breaches is now mandatory and the penalties for not notifying a breach are correctly more serious. Therefore businesses that do suffer a breach need to report it immediately.

If fines will ensure then every business needs to rethink their attitude to cyber insurance and if they do not have the cover consider obtaining the protection and of course making sure that it provides cover for any fines or penalties.

While does provide a detailed summary of the features and benefits of the majority of cyber policies available in Australia, it is my recommendation to any organisation looking for cyber insurance to obtain the advice of an insurance broker to obtain the right insurance protection for them.

This is a class of insurance that is changing rapidly and as with the cyber security itself it is not a set and forget issue. Both cyber security and the protection afforded by cyber insurance protection needs to be reviewed constantly, the later at least each renewal.


Read Me View comments

Product Recalls Australia – 20 March 2018

This week’s product recalls includes the following:

Daimler Truck & Bus Australia Pacific Pty Ltd — Mercedes-Benz Unimog

Read more

American Special Vehicles — RAM 2500 (DJ) & 3500 (D2) Trucks

Read more

Volkswagen Group Australia Pty Ltd — MY2011 – MY2012 Golf, Passat and CC

Read more

Home Ice Cream Pty Ltd — Coconutters Mango Vanilla

Read more

Mercedes-Benz Vans Australia Pty Ltd — MY15 – MY17 V Class / Vito Van (Extended Recall)

Read more

Harley-Davidson Motor Company Inc — Accessories-Detachable Saddlebag

Read more

Hongkong SunRise Trading Ltd — Victa Brand 80V and 82V Cordless Electric Chainsaws

Read more

American Special Vehicles — RAM 2500 (DJ) & 3500 (D2) Trucks

Read more

Metcash Food & Grocery Pty Ltd — Black & Gold Bleach Regular 2L and Black & Gold Bleach Lemon 2L

Read more

Unique Health Products Pty Ltd — The Whole Foodies Sea Vegetables Mixed Seaweed

Read more

Cherub Baby — Cherub Baby Car Bottle Warmer

Read more

PS Importers — Piaggio Medley 150/150S ABS

Read more

Toyota Motor Corporation Australia Limited — Corolla Sedan, Corolla Hatch and Rukus Motor Vehicles

Read more

Read Me View comments

Self driving cars ARE the future.

As has been reported in the news today, Uber has suspended its self driving car testing after a pedestrian was hit and killed in the state of Arizona, United States.

I said in a 2016 blog and I still maintain that, there is no doubt there will be accidents and deaths as the technology is developed, but there is already clear evidence that self driving cars are becoming more and more safe and if you consider the number of miles that have already been driven by self driving vehicles and the fact that, to my knowledge, only two people have died during this entire period, I do hope that lessons will be learned from this tragic death, but the development will continue for the greater good of us all. 

Read Me 2 Comments

Product Recalls Australia – 13 March 2018

This week’s product recalls includes the following:

SRG Leisure Retail Pty Ltd — Rooftop Tent Auto Hardtop XTM (extended recall)

Read more

Woolworths Limited — Macro Natural Sunflower Kernels 500g

Read more

PS Importers — Piaggio Fly 150 3V

Read more

Lenovo (Australia & New Zealand) — Gen5 X1 Carbon Notebooks

Read more

Kmart Australia Ltd — 2 Slice Stainless Steel Toaster

Read more

Healthy Warrior Pty Ltd — Hemp Vegan Protein Powder

Read more

Ford Motor Company of Australia Limited — Ford Courier, Econovan and Ranger

Read more

FCA Australia Pty Ltd — 2017 Jeep Wrangler (JK)

Read more

Tiffany & Co — Wheat Leaf Crystal Glass Mug

Read more

Citroen Australia — Citroen C4 Picasso

Read more

Read Me View comments

Well done Chubb and Lockton on no longer selling Carry Guard (gun) insurance

I would like to add my support for the decision taken by insurer Chubb Insurance and insurance broker Lockton to no longer support the National Rifle Association (NRA’S) Carry Guard insurance program in the United States which did provide liability coverage for NRA members who use their fire arms in self defence.

This will leave a gap in coverage as most of the home policies I have reviewed do not offer this coverage.

This is another case in a long history for the insurance industry where they have shown a social conscience and used their influence for good.

Well done to both organisations.

Read Me View comments

Product Recalls Australia – 6 March 2018

This week’s product recalls includes the following:

Innovations Direct Pty Ltd — Treadmill with Shock Absorption

Read more

DCTCP Pty Ltd t/as Wild and Wolf — Musical Jumbo Wooden Xylophone

Read more

Impulse Variety Products — Magnetic Hematite Rattlesnake Eggs

Read more

Peugeot Automobiles Australia — Peugeot P308 (T9)

Read more

Audi Australia Pty Ltd — Audi Q3 (8U)

Read more

BIG W — B Collection Toddler Girls Bomber Jacket

Read more

Hyundai Motor Company Australia Pty Ltd — Hyundai Sonata (NF) and Grandeur (TG)

Read more

Manassen Foods Australia Pty Ltd — Sharwood’s Plain Puppodums 113g

Read more

Read Me View comments