What is a specific indemnity on my insurance policy?

Click here to find out more about Specific Indemnity Insurance for Contractors with S.A. Faughnan

Having adequate Employers and Public Insurance cover is very important for your business but you need to ensure that the insurances extend to cover the scope of works being undertaken.

Indemnity to Principal clauses satisfy a requirement in a contract for the contractor to provide an indemnity to a principal, or a requirement for the contractor to extend his liability policy so that the principal is indemnified as if he were the insured.

The standard indemnity to principals’ clause found on liability policies may not always suffice and thus the reason to request a specific indemnity e.g. a tenant in a building engages a contractor to carry out a fit out to the premises. In this case the principal is the tenant but how is the actual property owner protected in the event of a claim resulting from this fit out? Thus the reason to get a specific indemnity to the property owner on the contractors insurance. Important insurance terms can be misunderstood and cause problems with claims. Certain types of occupations may be required to have an insurance policy that offers indemnity to principals but confusing this with the general principle of indemnity could result in insufficient cover.

Definitions:

• Principals:  a principal (in business)  is someone who can be held liable for another person e.g. if an employee causes harm/damage to a third party/property  during the course of his employment, the employer can held responsible as a result.

• An indemnity to principal clause in an insurance policy: extends liability coverage to a principal if he is sued as a result of another person’s actions.

• Principle of Indemnity: All insurance is based on the principle of indemnity, which states that you are entitled to be restored to the original state following a claim by an insurance settlement without making a profit or financial gain.

• Indemnity in Liability: Liability insurance deals with non-property losses such as physical injuries, lost wages and personal injuries. Indemnity is compensation for damages or loss. The concept of indemnity is based on a contractual agreement made between two parties, in which one party agrees to pay for potential losses or damages caused by the other party. A typical example is an insurance contract, whereby one party (the insurer) agrees to compensate the other (the insured) for any damages or losses, in return for premiums paid by the insured to the insurer.

Remember – A general indemnity to principals clause on a liability insurance policy may not suffice thus the reason to request a specific indemnity in some cases.

Click here to find out more about Specific Indemnity Insurance for Contractors with S.A. Faughnan