Interesting Blog Question on relying on a home policy for liability borne out of a contract.

I received the following question from one of the brokers I admire most when it comes to technical knowledge and commitment to the insurance industry and his clients. It is one of the few occasions I can recall taking a different view. Here is the issue:

There is a clause that is an exclusion in a Householder’s policy Liability section, which I think is being misinterpreted. It is “Any agreement or contract you enter into”, however we will cover your liability if you would have been liable without the agreement or contract.

As a result, I am getting lots of requests to quote Event Liability Insurance for things like birthday parties in a local hall or park. The Council or Hall Hirer demands they have at least $10,000,000 cover. Insurer sees that as an agreement. I point to the second part and say they would still have a common law duty of care anyway so that part should be covered, not if there was a hold harmless requirement though.

As a consequence, they cannot get certificates of currency off the insurer to provide as evidence to the property owner.

The weird thing is some policies exclude leases being part of this exclusion, others make no mention of this.

To me the intent is not to place more of the normal PL [public liability] risk on the insurers than otherwise would be, in any contract that is signed.

Of course none of these issues are picked up or interpreted in your policy comparison.  So how do you think this clause should be interpreted?

Regards

Robert [surname and email attached]

============================================================

I replied as follows:

Hi Robert,

A lot of the council and community halls require very broad protection against them, through the terms of the hire agreement/contract to the detriment of the party holder.

Let us say someone gets electrocuted or a wall collapses, someone trips over a rough edge on a step or pathway. The holder of the party would not normally be held responsible, but the contract may put the onus back on them for the duration they are there. If the contract has an indemnity clause or requires the owner of the property to be named as an insured then there can be a very real problem.

Their home owner or home contents policy would not indemnify them, or in most cases provide legal expense cover, as this liability arises solely out of the contract.

It is unreasonable in my mind that the contracts have such clauses but it is a simple case of the landlord or operator of the venue wishing to transfer the risk away from themselves to the, often unsuspecting, party holder.

There have been a couple of really big cases along this line and the party holder did not have insurance and in one major case I am aware of they sued the broker.

With some home owner and home contents policies there are blanket exclusions on any loss arising out of the consumption of alcohol and drugs. This is not illegal drugs but any drug. Either exclusion may well make the policy of no value to the Insured when hosting a party at their home or at another venue.

Another issue is that we have had a lot of problems with gate crashes who hear about the event on social media and this creates another whole problem in itself, although this seems not to have been in the news here as much as in the past or perhaps my children are now out of that teenage period (Thank goodness).

I think events liability insurance is the way to go and keep the householders policy completely out of it, the householders policy has not been designed as I see it for this type of one off risk.

Regards

Allan

PS: the whole issue of contract risk is so serious it prompted me to write my first eBook on the subject. This can be downloaded free here or you can purchase a hard copy from the publications area of the LMI Group website.

Leave a Reply

Your email address will not be published. Required fields are marked *

*