Decision puts pressure on principal’s liability

A recent NSW Court of Appeal decisions threatens to change the way insurers word their public liability policies, says a legal expert.

Delivered earlier this year, the GIO General v Centennial Newstan case delved into when contractors are required to extend their insurance cover to their principals’ negligence.

Concerning a mine worker who was supplied by a third party and whose leg was crushed in an accident, the Centennial decision found GIO had agreed to insure the principal for its own legal liabilities arising out of the supply of labour hire, even though the loss was not caused by the supplier.

The Fold Legal Solicitor-Director Charmian Holmes says the decision means insurers could become gun-shy about providing principal’s liability cover, which is never intended to insure principals for their own activities.

She says brokers will need to assess the different types of principal’s liability cover available to see which is suitable for their clients and always check the policy against the contract requirements.

“Hopefully, insurers will find a middle ground which ensures that suppliers can still get principal’s liability cover and it operates when the supplier’s acts or omission or their work has caused loss or they have been negligent,” she says.

“If this is done, everyone will have a better understanding of precisely what is covered.”