Blog question on goods in physical and legal control
I received this question this morning.
Good morning Allan,
I hope you can assist.
Having trouble deciphering the Property in your Care custody and Control wording in the [insurer name withheld] Trade Wording
I have attached the Liability section and the property in control wording.
Our client are concreters and will be hiring some lighting equipment valued at $14,000 as they will be working at night.
They will have this equipment for about 3 months.
The question is, will they be indemnified under this wording for loss or damage to this equipment?
The hiring agreement states the hirer is responsible for all loss and damage.
The client has an option to pay a damage waiver of 12.5% a day of the hiring cost which based on 3 months totals about $450.
Rob [surname and email withheld]
I replied as follows:
My reading of this is that it is not fully protected as they need to be.
The trouble with a liability policy is that the Insured needs to be held legally liable. If for example they took great care of the product and locked it up really securely at night and it was still stolen or it was burnt in a fire started in a nearby premises through no fault of the Insured, the Insured would still be liable under the terms of the hire contract.
There is a contractual liability exclusion which has a write back for incidental contracts.
The incidental contracts are defined as follows:
The hire contract probably has a requirement that the goods be replaced new for old whereas a liability policy the basis of settlement is indemnity.
The Insured either needs to have the items included in the property section showing the hirer for their respective rights and interests or they need to buy the cover from the hire company.
To me this insurance component by many hire companies is the biggest rip off and a type of add on insurance that needs to be investigated. It is highway robbery.
That aside on my reading of the policy, there is cover, should the insured be found legally liable except under contract, up to $250,000 on hire equipment other than motor vehicles. I am not sure if the unit would be described as a motor vehicle based on what I have been provided.
But again I stress the client would have to be legally liable for the loss through negligence not contract.
The second edition of Mannings Guide to Contract Risk is about to be published and Steve and I discuss this and other contract risk in more detail in this popular book available in soft cover or as a downloadable eBook. I will post an article when it is ready for download.