Professional Liability Guide

CHAPTER 9 – EXCLUSIONS

More recently, the Court of Appeal in the UK decision in Safeway Stores Ltd v Twigger 534 confirmed that where an offence had been committed by a company ‘ intentionally or negligently ’, it was contrary to public policy to allow the company to have an entitlement to recover the penalty from former officers of the company whose behaviour had led to the imposition of the penalty.

Applying this approach, the best guidance seems to be the distinction between:

ƒ on the one hand, intentional or fault-based crimes involving at least an element of reckless behaviour such as wilful blindness or indifference to the consequences of one’s actions; ƒ on the other hand, unintentional or inadvertent offences, such as those involving strict liability offences or arising from vicarious liability that have no mens rea (the necessary element of intent) or moral turpitude.

This second category would probably not offend public policy and, therefore, not fall foul of the requirements for wilful or intentional conduct exclusions.

Contractual/assumed liability As a rule, an insurer will not cover an insured for loss that the insured assumes completely under and by reason of any:

contractual agreement or arrangement; or performance guarantee or warranty.

ƒ ƒ

Accordingly, an insurer will not be liable for any loss arising from a duty or obligation assumed by an insured unless the insured is liable for that loss at law in any event. For example, if a contract between two parties commits an insured’s common law duties of care to writing so that they form part of the contract between those parties, a claim for a breach of those contractual obligations will not trigger the contractual/assumed liability exclusion because the obligations arise at law in any event. The exclusion is intended to apply where, by agreement, an insured extends the limits of their ordinary liability derived from other sources, such as by an agreement imposing liability for injury without proof of fault. The exclusion is also directed to cases where the insured assumes a liability beyond that which is normally incident to the occasion – for example, the degree of skill ordinarily expected of an expert or the provision of a contractual indemnity for another party’s own acts of negligence. Other exclusions Professional indemnity policies also commonly exclude cover for any claim arising from: ƒ personal injuries (except to the extent that the personal injuries arise from a breach of professional duty), property damage and occupiers’ liability (which are the domain of a public liability policy); ƒ a failure by a professional to disclose a conflict of interest; ƒ the insured’s insolvency, administration, receivership or bankruptcy; ƒ trading losses or debts; ƒ disputes involving fees, charges, commissions or any other form of remuneration or consideration for professional services; and ƒ an employer’s liability or its obligation to employees (which are usually covered by workers’ compensation policies).

534 [2010] AII ER (D) 245.

103

© Carter Newell 2023