A gamble on insurance
04 Nov 2008
The rail industry employs some 25,000 sub contractors with the majority engaged through recruitment agencies facilitating essential operational works on its rolling stock and infrastructure assets. For the last eighteen months, and in conjunction with QBE, Bond Insurance Services Limited have been studying the insurance relationships in place between End User/ Agency and Contractor.
On April the 6th 2007, revised Managed Service Companies (MSC) legislation further defined contract relationships, in our opinion clearly stating ’the only way in which service providers/agencies can support their client companies is by providing accountancy and legal services to them in a professional capacity’.
Whilst the provision of group insurances does not automatically deem the service provider/agency an MSC provider, the terms under which the group insurances are offered need to be examined:
• Is the individual company noted on the policy documentation?
• If another service provider/agency engages the company/individual does the insurance cover previously provided transfer with the company/individual?
• Does the insurance suitably cover the company/individual for the work undertaken?
• Is authority for any aspect of the trading/provision of the company’s/individual’s services delegated to the service provider/agency?
• Does the service provider/agency interpose themselves between the company/individual and the end user/client in any other way whatsoever?
From this it becomes apparent that group insurance issued by a service provider/agency to a company/individual has the potential to fail MSC legislative requirements and we now see market leaders removing group insurance policies from the services they offer. Group insurances carry the additional risk of leaving individuals uninsured on generic policy wordings which often exclude specific rail biased works. In simple terms, generic policies often offer relatively low premiums however effectively rendering the worker liable, should a claim arise due to exclusions in the policy wording.
Andy Graham of Cobra London Markets commented, ’The Railway Industry has always presented Insurers with difficulties. Many policy wordings may exclude work on, or on behalf of the Railway Industry. Bond Insurance Services Ltd has teamed up with leading Insurer QBE at Lloyds, who carry specific knowledge of the Industry to facilitate a Scheme to ensure coverage meets their client’s legal and contractual requirements at very competitive premiums.
Working closely with agencies, rail companies and contractors, and with the support of one of the largest rail insurers in Lloyds of London, QBE, we have constructed a comprehensive scheme designed purely to serve the legal and contractual needs of the contractor in this unique industry’.
Elaine Southwell of Bond Insurance Services Ltd commented, ’You may find companies who are willing to quote cheap Public Liability, however you need to ensure the protection they are offering covers you for the duties you will be performing. Unless you make it very clear that you are performing your duties on the railways, you may find you are not covered and the premium you paid was worthless.’
For the Limited Company Contractor
In the case of an accident or damage occurring to third party property the principal insurers will always look to pass their liability down the line. In every issued contract you will find clauses similar to:
The Contractor shall be liable for any loss, damage or injury to any party resulting from the negligent acts or omissions of The Contractor or Staff employed by the Contractor during a project.
The Contractor shall ensure the provision of adequate, Public Liability Insurance and any other suitable policies of insurance in respect of the Contractor and any Staff employed by the Contractor during a Project in order to fulfil its obligations under this Agreement and shall make a copy of such policies available to the Employment Business upon request.
As you can see you are liable for any damages caused by you to third party property in effect leaving you, the contractor, directly in the firing line. Rolling stock and infrastructure are both expensive commodities, however it is often the legal costs associated with fighting a claim which has the potential to bankrupt defendants i.e. the contractor.
The scheme offers peace of mind by offering £5 million in defence costs and appointing a QBE legal team to act on your behalf. In an increasingly litigious environment it is our opinion that this is essential cover. The scheme also offers a personal accident bolt-on should you injure yourself whilst at work. The policy will pay out during the time you are unable to work (subject to the terms and conditions of the policy).
For the Agency
For the agency, the scheme offers a simple solution to their contractual requirements by providing suitably insured staff to the client/end user. The scheme also allows the agency to place staff in high risk areas which their current policy exclusions may prevent, whilst also allowing the agency to reduce their own overheads associated with contingent employers liability. We believe this is a simple solution to an otherwise complex industry-wide issue.
In the majority of trades/service sectors the company/individual is required to provide evidence they are suitably insured before being allowed on site. Given the cost of rolling stock and associated infrastructure assets in an industry that primarily serves the public, we find it unusual no such requirements are currently in place for contractors to carry their own Public Liability. We also find it remarkable considering the premiums associated with contingent liabilities for rail workers, that a service provider/ agency can offer generic group insurance to effectively cover all disciplines of its clients in the rail sector, effectively leaving the contractor uninsured on policy exclusions.
The scheme has been designed with 6 categories to cover all tasks carried out in this diverse industry with the assumption that all workers have the capacity to work in a safety critical manner. The days of a ’head in the sand approach are gone,’ which is why this scheme has been designed in conjunction with rail industry contractors and businesses with a real focus on industry specific needs.