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 a focus on insurance and the gaps to look out for in nuclear contracts and insurance arrangements, as well as the options available to minimise or remove these gaps. This is one of three sequentially linked papers that summarise the seminar’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 for specified amounts to cover liability for nuclear damage; both the financial amount and the scope of cover will change when the 2004 Protocol to revise the 1960 Paris Convention is ratified. In the UK the Nuclear Installations Act will be amended to introduce these changes into UK law, probably in 2020.
- At present insurance capacity will be available to cover the new financial amount, but insurance for the full scope of the revised nuclear damage cover is not available.
- Governments (including the UK) are considering providing some form of insurance or reinsurance to fill some of the gaps, if the insurers cannot do so when ratification occurs.
Liability assumed by contract
- The nuclear liability Conventions permit reallocation of liability by contract; therefore, site operators can try to pass liability to contractors.
- Although this undermines the principle of strict liability, several options exist to mitigate this exposure, including insurance.
Onsite operator or contractor property damage
- The liability Conventions are unclear on the final liability for onsite damage (i.e. not 3rd party).
- Insurance contracts must be crafted carefully to ensure 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 will reduce this exposure; however, transporters can be exposed to additional liability. Insurance solutions for this are available.
- Possible gaps in cover can arise in the complex world of nuclear transport liability and insurance. A thorough review and understanding of the whole voyage is essential.
New build and onsite construction
- Construction insurance policies generally exclude nuclear exposure; gaps in cover can occur both with new build (as nuclear exposure increases) and with onsite projects.
- Gaps or overlaps between insurance and warranties must also be carefully analysed.
About the Author
Mark Tetley has wide experience gained from senior positions across the London insurance market as both an underwriter and a broker , in a variety of sectors. He provides advice and assistance on a wide range of insurance and risk issues, including comprehensive nuclear liability and property insurance assistance, complex infrastructure project programme design and review, claims and policy reviews, assistance with project insurance design and implementation in developing countries, and many other aspects of risk mitigation.
Prospect Group is an award winning Multi-Disciplinary Practice combining the legal services of Prospect Law with the consultancy services of Prospect Advisory. Our lawyers and technical experts provide a single point of reference for clients involved in energy, infrastructure and other development projects.
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