Employee or contractor?
Question
My client owns a transport company. One of their "employees" is employed on a sub-contracting basis, invoicing the company each month for his hours. He does not work for anyone else, just my client. His duties include driving as well as some light engineering and repair work as required on my client's own vehicles (no third-party repair work is undertaken). For all intents and purposes, he is really an "employee".
I have approached my client's insurer and queried whether the sub-contractor is included under clients liability cover. Insurer advises yes, but only for driving activities as they are a transport company, not for engineering/repair work. Not sure I agree with this.
Does the sub-contractor need his own liability cover, and what about statutory liability?
Reply - Jay Singh, NZI
Most GL polices automatically provide cover for uninsured contractors whilst engaged/working only for the entity named on the schedule (insured) and the stats policy can be endorsed to cover them as well. This is designed to capture and cover the above employment arrangement.In respect of the activities not covered, this can easily be fixed by just noting those additional activities on the policy under the business description, but not sure if this is relevant here given the engineering and repair work is only done on the insured's own vehicles. Liability policy won't cover any damage as not TP property and most GL wordings would exclude cross liability.
GST concerns
Question
When an Excess/Deductible is payable by a commercial client, usually this includes GST - a $500 Excess is $434.78 + GST.
In a recent claim, the Insurer has requested that our client pay their excess to them as they will be paying the repair invoice in full - but are not prepared to provide a GST invoice to enable this GST content to be recovered by the GST-registered client.
Whilst I appreciate that the excess is a retained cost, my question is whether the client can properly recover the GST without such a GST invoice? And if not legally able to do so, how can this best be resolved?
Reply - Crossley Gates, DLA Piper
I am no tax lawyer, but the excess is an uninsured amount that remains payable by the insured to whoever is carrying out the repair/replacement of the asset insured.
I don't believe the insurer can insist on it being paid to it instead. If doing this has a negative impact on the GST position of the insured (which looks likely) then the insured can probably refuse to do this and insist on paying it to the supplier of the goods/services and receive a GST receipt in the usual way.
What's average?
Question
My client inadvertently under-insured some property under a marine cargo transit insurance. The client suffered a loss and the insurer is applying the "average clause", which is in the policy.
Under the ILRA 1985 it states: "...Where a contract of insurance (not being a contract to which section 15 of this Act applies or a contract of marine insurance within the meaning of section 3 of the Marine Insurance Act 1908) contains a pro rata condition of average, the condition shall be of no effect unless, before that contract is entered into, the insurer clearly informs the insured in writing of the nature and effect of the condition. (2) Notwithstanding subsection (1), where it is not reasonably practicable for the information required by that subsection to be given to the insured in writing before the contract is entered into, that subsection shall be deemed to be complied with if the insurer–
(a) gives the information orally before the contract is entered into; and
(b) gives the information in writing as soon as it is reasonably practicable to do so."
The insurer when advising terms for the risk did not advise that "average" would apply, nor did they advise on their policy schedule received after the insurance was placed that it applied. The particular policy that applied is an updated wording, but that particular policy wording was not on their website, nor has the insurer sent through a copy of it (but they did send through the earlier wording. I have no doubt however that the modified policy would also include "average").
The insurer has advised that the rules relating to the application of "average" do not apply to marine contracts. This seems very unfair- I have tried to look through the Marine Insurance Act but apart from advising "average" applies nothing else is of assistance. Surely the Insurer is bound by some legislation to advise of average applying to applicable policies.
In this case they did not comply, they have not even supplied a copy of the correct wording, and on the submission document to the underwriter it did advise that the client was unsure of the value of the items and requested terms on different values. At what stage should the underwriter make the client aware of the clause?
Reply - Crossley Gates, DLA Piper
As the quote from section 16 above says, the section doesn’t apply to marine insurance as defined in section 3 of the Marine Insurance Act. Therefore, if the policy you refer to comes within section 3 then the underwriter is correct I am afraid.
Reply - Pauline Davies, Fee Langstone
Crossley is correct. The Marine Insurance Act applies automatically as a matter of law to all contracts of marine insurance, so strictly speaking it isn't even necessary for the insurer to state that fact in the policy. It has to be remembered too, that underinsurance can also give rise to non-disclosure issues and will almost inevitably have had an impact on the amount of premium paid. The application of average largely redresses the balance in both areas.
Meth stink
Question
We recently transferred a client's insurance covers from one insurer to another. The new client tested his employee-occupied houses for meth contamination, one came back positive and needs cleaning. We submitted a claim to his new insurer, which has declined the claim as the contamination occurred before they went on risk.
The old insurer has a clause in their meth contamination clause that states for a meth claim to be accepted the client must be insured with that company when they make a claim.
15. Unlawful Substances
(a) You are insured for loss to your employee house resulting from contamination by an unlawful substance occurring during the period of insurance if your employee house is occupied by your employees and provided that your employee house is insured with us when you claim under this benefit.
In this case it is clearly evident that the contamination occurred whilst under the old insurer's policy, what are your thoughts about the insurer's ability to apply this time limitation on a claim?
Reply - Crossley Gates, DLA Piper
I am afraid your client doesn’t come within clause 15 and is out of luck.
Accidental damage
Question
We have a situation with our client. Tenant accidentally damaged the house with car. House insurer is saying the owner needs to pay the excess as they cannot recover it from the tenant's insurer because of Osaki vs Holler case as damage was unintentional.
My view is that that case pertained to a tenant who caused the damage themselves, not with an accessory that carried insurance.
Reply - Crossley Gates, DLA Piper
Osaki v Holler is the case that held that the Property Law Act exoneration provisions for lessees applies to residential leases as well as commercial leases. Therefore, the issue is determined by sections 269 to 272 of the Property Law Act.
Where the exoneration provisions apply (which will be the case here as it appears the damage was accidental) the tenant is exonerated from all liability. This will include both the insured and uninsured damage to your client's property.
Therefore, your client cannot recover the uninsured damage (excess) from the tenant in the same way he (or his subrogated insurer) cannot recover the insured damage either.
