With over 45 years in the insurance industry – spanning underwriting, broking, and portfolio leadership – Gary Woodhams, recently appointed National Underwriting Manager at UAA, has had the privilege of working with some of the most respected names in the business.
“My career has always been grounded in the heavy motor and mobile plant sectors, where I’ve developed a deep appreciation for the people, machinery, and risks that define this space. Now, in my new role with UAA, I’m excited to bring that experience to the forefront – supporting brokers, building technical capability, and helping shape the future of plant and equipment insurance. At heart, I’m still that curious, hands-on professional who enjoys solving complex challenges and building lasting relationships in an industry that never stands still,” said Gary.
“Australia has been enjoying a sustained period of growth across the transport and civil construction sectors. We are also seeing considerable construction activity in mining civil construction in response to the growing global demand for critical minerals. Similarly, we see growth in the general construction sectors (i.e. residential, commercial, institutional, health),” he said.
What has been driving this?
The key drivers for this growth came initially from bullish State and Federal government stimulus spending in response to the COVID pandemic. This continues to be pushed along in response to strong population growth pressures to ensure our urban and regional environments have the facilities to cope with this persistently increasing demand.
“This creates a pipeline of available work opportunities for crane hire companies – probably for at least the next five years. UAA’s view on the outlook for the crane industry is definitely very positive,” said Gary.
In this environment, there are many risks and challenges in business which need to be identified and mitigated. We all know the harsh reality is that all projects come with human, material, legal, financial, environmental and regulatory risk. As a crane hire business, navigating the complex world of contractual obligations and insurance requirements, is just as important as managing physical equipment and site based operational risks.
How do we go about navigating the world on contract management and insurance? It is imperative to maintain a consistent approach and engage the experts.
Navigating Contract Management and Insurance –
1) Obtain quality legal advice
It is well known that contractual wording can be complex and fraught with risk for the unwary. Engaging a lawyer who has experience and expertise with crane operation contracts is a smart risk management investment. They can help you navigate complex indemnity clauses and:
– ensure they are workable from your standpoint,
– align with your insurance coverage, and
– do not leave you with uninsured and unmanageable exposure.
Experienced lawyers understand the practical realities of crane operations. They can identify uninsurable risks in contract terms (which may be required to meet contract requirements) and assist you to negotiate reasonable contractual terms. They can also help you liaise with your insurance broker to convey your insurance requirements for a given contract.
Establish your operational risk profile
Before making any contact and engaging in negotiation, your lawyer will need to understand your risk profile to support the negotiating position and insurance requirements, including:
• Your safety record
• Equipment condition
• Operator qualifications
• Financial stability
• Provide documentation on operational procedures, safety management systems and any other documentation to support risk management processes.
• Specific site risks
• Copy of insurances and extensions
Indemnity Clauses in Contracts –
An indemnity clause transfers risk from one person to another. It can be specific (eg. a promise to hold a person harmless in relation to an occurrence from a particular event) or broadbrush (eg. to allocate risk of loss, damage or liability from certain events). Your insurance coverage needs to align as closely as possible to the requirements of such indemnity clauses. Importantly, you will also need to identify uninsured risks required by the indemnity clauses which you will have to manage in other ways.
The indemnity clause may enforce a legal requirement on the contractor (i.e. crane operator) to indemnify the principal (i.e. your client), from any direct or vicarious liabilities to third parties that may arise from your activities. In some cases, the indemnity in favour of the principal may require you to assume liability that is beyond normal legal requirement.
Public liability policies typically cover the insured against legal liability it may have to third parties for loss or damage to property, loss of use of undamaged property, or personal injury which arises out of an insured party’s activities. Therefore, a contractor’s liability under an indemnity in favour of the principal, against third party claims caused by the contractor’s activities, is likely to be covered under a public liability insurance issued to a crane operator. For this reason, a contractor’s lawyer should seek to negotiate and limit these indemnities as closely as possible to loss or damage arising from negligence of the contractor (i.e. strictly fault-based indemnities).
Mutual (fault-based) indemnification clauses require each party to the contract to assume responsibility for losses arising from their own negligence. This is a reciprocal obligation where both parties indemnify each other with the aim of helping to reduce the likelihood of disputes between parties to the contract by keeping each party’s strict legal liability obligations separate and clear.
It is important to note indemnification clauses need to be carefully reviewed to ensure they are enforceable and as far as possible, insurable. It is even more important to identify uninsured risks so other forms of risk management can be applied. Once we start going beyond fault-based indemnities, we become open to potential for uninsured loss. It is critical to remember that insurance policies are limited to their terms, conditions and exclusions and can only be extended to meet contractual indemnities within the insurer’s restraints. Most policies contain a contractual exclusion (unless the liability would have been incurred even in the absence of the contract).
Some Commonly Requested Contractual Requirements
Blanket Hold Harmless Clauses
Put simply, a Hold Harmless Clause is a provision within a contract where the contractor agrees to indemnify, and assume responsibility for, liability – even if another party (usually the principal/client) is at fault.
Typically, these clauses contain all-inclusive words, such as “all claims”, “all damage”, “any” loss,” “any person”, “any reason”, “howsoever caused”, “in connection with”. We have seen cases with a requirement for the contractor’s public liability policy to be extended to include “blanket contractual liability cover”.
To further move a contractor’s exposure and responsibility for principal’s/client’s risk, contractual insurance clauses may require the client to be added as a “named” or “joint insured” – thereby allowing the client full access to the contractor’s insurance policy.
Insurance requirements
After you have reviewed the indemnity clauses, the insurance clauses need to be carefully reviewed. The type of insurance you have (or will require!) needs to match, as far as possible, the insurance clauses in your contract. (Note: Non-insurance people often confuse “indemnity” with “insurance” in a contract, believing them to be the same thing. They are not the same. As you will now know from this article, they are two distinctly different facets of contractual requirement).
Typical extensions required can include
Named or Joint Insured – This provides the client full protection under the policy. As an insured, this will allow the client to enforce the policy directly against the insurer and lodge claims – and not necessarily arising from the “policy owner’s” acts.
This requirement is typically required with Hold Harmless indemnity clauses but can also be seen in fault-based indemnities. (Australian Standard construction contracts contain this requirement).
Cross liability – “Cross liability” is insurance jargon. It is an automatic benefit under most quality public liability policies. The clause allows one insured party under a policy to claim against another insured party under the same policy – as if they were two separate parties.
Naturally, the risk of such a claim being made against a contractor’s policy is increased when a contract requires external parties to be “named” or “joint insured’s”.
Waiver of subrogation – “Subrogation” is insurance jargon. This provision is where one party agrees to give up their right of recovery to seek compensation from the party responsible for the loss or damage. Normally your insurer will pay for damage to your property and will then have the right to pursue the party responsible for the damage to recover the cost of the claim as if they were you seeking such recovery. With a subrogation waiver requirement in a contract, your insurer must agree to not pursue compensation from the party named.
There can be other requirements depending on the policy class involved. There could also be requirements for certificates of currency, cancellation notices, loss payee clauses to name a few others.
2) Speak to your insurance broker
“They are your professional risk advisors supported by UAA’s understanding of contract management complexities through insurance. Our recommendation is to engage your broker early – from the commencement of the tender process. In collaboration with your lawyer, your broker will provide those critical inputs at the right time on insurance coverage, limitations, and gaps. They will explore extensions or other policies to ensure you are covered as far as possible for any outstanding coverage requirements and should explain where you are not covered,” said Gary.
“Brokers who understand crane operations’ unique risks can structure coverage to match contract requirements and identify gaps before they become an issue.
“Never leave it to the last minute to engage your broker or – worse – after you have signed the contract. At the end of the day, professional guidance is essential for you to be fully aware of the risks involved and to allow you to make an informed decision before committing yourself to any contract,” he said.