When it comes to contracts, how many times have you heard the adage, ‘The devil is always in the detail’? An insurance policy is a contract like any other, so why do so many businesses continue to get caught out by ‘the detail’?
We are all painfully aware that the waste and recycling industry has suffered in recent years from negative press, largely brought about by a continuing drip feed of high-profile, well-publicised fires. This has resulted in many insurers pulling out of the market, leaving those that remain to cherry-pick the risks they are prepared to cover.
The terms and conditions insurers apply to a waste and recycling risk will often be determined by the nature of the materials they handle and the processes they put those materials through. It is vitally important that businesses understand these conditions when buying their insurance and how they may affect the daily operation of the business.
Your insurance broker should explain these fully to you before you put pen to paper. If you can’t comply, then you need to tell your broker and let them try to negotiate with insurers to find a compromise.
Insurers will often apply warranties and conditions that reinforce what appears to be common sense risk management; for example, the cleaning down of machinery on a daily basis, or the safe storage of materials away from buildings or machinery.
Failure to comply with these conditions may seem a trivial matter to some, but they can be the difference between having a major incident and not; or making a successful claim, or not.
Yet it never ceases to amaze me how often businesses pay lip service to these conditions or, worse still, are unaware of them – or have just not implemented procedures within their businesses to ensure compliance.
Your insurance broker’s job is to understand your business thoroughly enough to be able to protect it against catastrophe.
More often than not, businesses fail to read through what their broker has sent them, or fail to ask sufficient questions, either of themselves internally, or of their broker, when putting their insurance programme together. We’ve met businesses with open-sided transfer stations where the buildings definition stated that they had to be ‘capable of being secured against unauthorised entry’. We’ve visited businesses that treat hazardous liquid materials with no pollution liability cover at all.
These errors generally tend to be down to a couple of factors. First, people do not allow enough time to undertake a thorough review of their operation and wade through the paperwork – instead they focus more on the price. Alternatively the broker involved is not a specialist in the industry and isn’t necessarily aware of the requirements of a waste and recycling business, placing their emphasis on price first, policy cover second.
From 12 August this year the Insurance Act 2015 came into force. The Act aims to introduce greater clarity around what information a client has to provide to their insurers.
Businesses must now make ‘fair presentation of the risk’ to the insurer. This will include the insured undertaking a ‘reasonable search’ for material information, as they will be taken to know anything that should reasonably have been revealed by a reasonable search of all information available to them.
Under previous law, breach of a warranty in an insurance contract automatically discharged the insurer from liability from that point onwards, even if the breach was subsequently remedied or completely unrelated to the type of loss occurring.
Under the new Act, breaches of warranty can be remedied.
Also, previously insurers could refuse a claim owing to breach of a policy term, even if the term was irrelevant to the loss. The Act now provides that an insurer may not rely on the insured’s breach of a term to avoid paying a claim if the breach could not have increased the risk of the loss which actually occurred.
If you’re unsure of the terms and conditions of your policy, isn’t it time you checked them out? Otherwise, when you come to claim, your insurance policy may be nothing but an expensive piece of paper.
Tim Rogers is senior account director at Waste Insure. For more advice on insurance issues, contact him on 01905 675783 or visit him at Stand No 4K15 at RWM 2016