What to look out for when taking out insurance

Our latest article for Wind Energy Network Magazine in which Senior Solicitor, Reina Van Pallandt discusses what to look out for when researching a good insurance policy which will ultimately deliver when a claim needs to be made.

Last issue’s column recommended the use of a clear strategy for insurance purchase, once a thorough risk assessment has been carried out and the decision has been taken that the risks inherent in a venture are best covered by insurance.

But how to go about committing to an insurance policy which will ultimately deliver when the insured risk arises and a claim under the policy is made?
The wealth of insurance litigation resulting from insurers refusing cover when an incident has occurred demonstrates that a meeting of minds between the insurers and the insured about the risk(s) to be covered, did not or not sufficiently, take place before the policy was written.

MAKING A DECISION

True, in depth scrutiny of the policy is a prerequisite for entering into a contract of insurance. Making an informed decision on its wording is key. At this point the would-be insured might turn to an insurance broker or approach an expert insurance lawyer. Traditionally, a broker acting for a party taking out insurance
would represent his or her interests and be viewed as independent from insurance companies and their agents.

Increasingly however, the parties may make use of in-house insurance specialists who will in turn rely on their own expert insurance lawyers and consultants whose advice will be based on a much greater familiarity with the client’s business, and who can be relied upon not to have an exclusive relationship with underwiters. Their explanation of the policy will be entirely client focused and therefore accurate and trustworthy.

GOOD ADVICE

However, in depth perusal of an insurance policy does frequently not suffice.

Good advice also relies on imagination, foresight, knowledge and experience. The ‘clear strategy’ for insurance purchase referred to earlier, should as a minimum be based on these four pillars.

‘Imagination’ means being able to ‘invent’ problems relating to liability exposure whilst ‘foresight’ can signify a correct estimate of the probability of an incident occurring. The party to be insured can assist and cooperate with his lawyer by informing him of the fruits of his own imagination as well as
his foresight.

Knowledge’ can for instance, include a comprehension of manufacturing processes or familiarity with the characteristics of certain materials the insured will be working with. A good lawyer and consultant will need to be well-informed and show understanding of his client’s business in order to provide support and add value.

Experience’ both with successful claims recoveries as well as with the pitfalls into which unsuccessful claims can stray, can only be gained by the lawyer (as well as the client), with time and a thorough immersion in the subject matter.

If the prospective insured follows these guidelines, then the chances will be relatively high that the parties have indeed followed a ‘clear strategy’ and will conclude an insurance policy which delivers on what it promises.

Prospect is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, insurance and risk management specialists, and finance experts.

This article remains the copyright property of Prospect Law Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.