Does your contract VOID your insurance?
There are a few clauses to look out for in any contract that are relevant to your insurance such as:
- Height Restrictions
- Maximum value of contract
- Sub contractors vicarious liability
- Overspray cover and wind restrictions
To name a few, however in today’s article I would like to speak to you about the big three:
- Named Insured
- Cross Liability
- Right of Subrogation
These may seem fairly innocent in a contract with a client, however in combination and, in some cases on their own will mean that you are insuring your clients business. Obviously as the intent of the insurer was to insure your business only it voids your insurance policy.
According to BusinessDictionary.com, named insured is defined as:
“Specifically named individual or firm (usually the policyholder) with whom an insurance contract is made, and whose interests are protected under the policy. In some cases, more than one entity may be designated as named insureds”.
In other words your contract is asking you to add your client to your insurance policy by naming them as an insured person. As the insurer is not aware of, or charged the appropriate premium for this entity it has not agreed to insure them. Should a claim occur and your client relies on this aspect of the contract, the insurer would not recognise them as an insured person and therefore you would have to rely on your own resources to settle the claim.
Having this in your contract will allow the client to sue you under your own policy as a named insured. If you were on a site with multiple contractors and someone from another business hurt themselves on property you own and or were responsible for, the cross liability clause would allow the “Named Insured” to claim against your policy.
Right of Subrogation
Dictionary.com defines Subrogation as:
2. Civil Law. to substitute (one person) for another with reference to a claim or right.
Simply this clause in your contract will not allow your insurer to recover part or all of the loss against a third party where it would normally be able to do so.
As you can see, these three sections that are commonly being included in contracts that you sign are effectively voiding your insurance. The insurer will not cover another entity that they have not agreed to cover and charged the appropriate premium for. We would suggest that you either use the standard Master Painters Association small and large contracts or provide a copy of your clients contract for us to review on your behalf before you sign.
Contracts can be sent to:
|Suite 19, 401 Pacific Highway
Artarmon NSW 2064
|P: 02 8436 9200|
|P: 1300 654 642|
|PO Box 833
Artarmon NSW 1570
|M: 0422 116 980|
|F: 1800 654 642|