This article is published further to the Prospect Group seminar held at the Centre, Birchwood Park, Warrington, on Tuesday 30th April 2019.
Please click here to see the event flyer.
The seminar addressed gaps in the world of nuclear contracts, with afocus on insurance and the gaps to look out for in nuclear contracts and insurancearrangements, as well as the options available to minimise or remove thesegaps. This is one of three sequentially linked papers that summarise theseminar’s content.
Part I outlined the insurers’ role in the development of the nuclear liability channelling principle, through the introduction of the radioactive contamination exclusion clause. This clause is used to manage the exposure and insurance availability from specialist insurers to cover a severe nuclear accident. This paper looks at some specific gaps in cover that can affect contractors, operators and/or buyers of insurance.
Financial security requirement for third-party liability
- Nuclear site operators need financial security forspecified amounts to cover liability for nuclear damage; both the financialamount and the scope of cover will change when the 2004 Protocol to revise the1960 Paris Convention is ratified. In the UK the Nuclear Installations Act willbe amended to introduce these changes into UK law, probably in 2020.
- At present insurance capacity will be available tocover the new financial amount, but insurance for the full scope of the revisednuclear damage cover is not available.
- Governments (including the UK) are consideringproviding some form of insurance or reinsurance to fill some of the gaps, ifthe insurers cannot do so when ratification occurs.
Liability assumed by contract
- The nuclear liability Conventions permitreallocation of liability by contract; therefore, site operators can try topass liability to contractors.
- Although this undermines the principle of strictliability, several options exist to mitigate this exposure, includinginsurance.
Onsite operator or contractor property damage
- The liability Conventions are unclear on the finalliability for onsite damage (i.e. not 3rd party).
- Insurance contracts must be crafted carefully toensure no gaps remain and any contractors’ nuclear liability is re-allocated.
Liability arising outside the geographical scope of the nuclear liability Conventions
- Once ratified, the Convention revisions willreduce this exposure; however, transporters can be exposed to additionalliability. Insurance solutions for this are available.
- Possible gaps in cover can arise in the complexworld of nuclear transport liability and insurance. A thorough review andunderstanding of the whole voyage is essential.
New build and onsite construction
- Construction insurance policies generally excludenuclear exposure; gaps in cover can occur both with new build (as nuclearexposure increases) and with onsite projects.
- Gaps or overlaps between insurance and warrantiesmust also be carefully analysed.
About the Author
Mark Tetley has wide experience gained fromsenior positions across the London insurance market as both anunderwriter and a broker , in a variety of sectors. He provides adviceand assistance on a wide range of insurance and risk issues, includingcomprehensive nuclear liability and property insurance assistance, complexinfrastructure project programme design and review, claims and policy reviews,assistance with project insurance design and implementation in developingcountries, and many other aspects of risk mitigation.
Prospect Group is an award winning Multi-Disciplinary Practice combiningthe legal services of Prospect Law with the consultancy services of ProspectAdvisory. Our lawyers and technical experts provide a single point of referencefor clients involved in energy, infrastructure and other development projects.
This article remains the copyrightproperty of Prospect Law Ltd and Prospect Advisory Ltd and neither the articlenor any part of it may be published or copied without the prior writtenpermission of the directors of Prospect Law and Prospect Advisory.
This article is not intended toconstitute legal or other professional advice and it should not be relied on inany way.
For moreinformation or assistance with a particular query, please in the first instancecontact Adam Mikula on 020 7947 5354 or by email on [email protected].