Have you ever wondered why your client needs to note the interest of a Principal on their policy?
Under a contract, the Principal is the entity that engages a Contractor to undertake certain agreed works or activities. Insurers are regularly asked to note Principals for their interest, on their Contractor’s Public and Products Liability insurance policy as the Principal is seeking to protect themselves from any vicarious liability arising from claims caused by the activities of their Contractor.
Occasionally the Principal will even ask to be noted as a named insured on the Contractor’s policy! This should be met with reluctance due to the potential for claims that may arise from outside the contract or even due to the liability of the Principal.
How can insurers satisfactorily facilitate this? The answer is by agreeing to a Principals Indemnity clause. The Principals Indemnity clause effectively includes the Principal as an insured party in respect of their vicarious liability, but only to the extent required by the contract or agreement and subject to normal limits, terms, and conditions of the policy.
So, if there is a claim against the Contractor and the Principal, arising out of an act or omission of the Contractor, the Principal will be covered under the contractor’s Liability policy as an insured party.
Most contracts will also include a waiver, where the contractor will be asked to waive their rights to recover against the Principal. These can generally be considered by insurers on a case-by-case basis.
If you would like to discuss further, please reach out to our National Liability Manager, Glenn Eason:
E: glenneason@solutionunderwriting.com.au
Ph: 03 8636 0492
M: 0427 545 780
