Category

Insurance

New Unfair Contract Laws Explained

By | Insurance, Legal, News

Source: ‘Frankology’ Blog, By The Fold

The unfair contract laws* which start on 12 November 2016 will be a powerful tool for small businesses when negotiating contractual indemnities. Charmian Holmes explores why…

What is an unfair contract term?
An unfair contract term is a term which:
• causes significant unbalance to someone’s rights and obligations;
• would cause them detriment if it was relied on; and
• is not reasonably necessary to protect the legitimate interests of the party relying on it.

Until now, small business had no option but to sign an unfair contract – or miss out on the opportunity for that work.

Who’s protected?
There are 2 key criteria:
• you must be a small business (ie less than 20 employees); and
• (the upfront contract price must be <$300,000 (for contracts of 12 months or less) or <$1,000,000 (for contracts of > 12 months).

From 12 November 2016, small businesses can challenge any unfair contract term. The onus is on the big business (or government authority) to prove those terms are not unfair. If they are, the term is void and can’t be enforced against the small business.

This is a long awaited and hard won protection for small businesses which has the potential to significantly enhance their ability and willingness to provide services to big business. Let’s look at how it will apply to unbalanced indemnity clauses.

One-sided indemnity clauses
There are a number of ways in which indemnity clauses could be challenged as unfair contract terms – these include:
• Indemnities which transfer liability to the small business for losses or liability regardless of fault.
• Indemnities that require the small business to be liable for the other party’s negligence.
• Unlimited indemnities, eg where there is no financial limitation.
• Indemnities for consequential loss, or excessive liquidated damages.

What about contracting out of proportionate liability?
The proportionate liability laws enable contracting parties’ liabilities to be adjusted to the proportion to which they caused, or contributed to an event that caused a loss. Clauses which contract out of this and impede the small business’ ability to join the big business as a concurrent wrongdoer in litigation involving a third party are manifestly unfair!

This means that small businesses can challenge any indemnity clause that differs substantially from the smaller business’ liability in the absence of the contract. Especially if it would trigger a contractual liability exclusion in an insurance policy – as this would mean that the small business would

have no insurance coverage for the exposure.
Small businesses rarely have the financial resources to indemnify big business without recourse to their liability insurance. The irony in this situation is that the contract usually requires the small business to hold

those insurances for this very purpose.
Once the new laws commence, small businesses will have more ability to challenge these types of clauses as it will be illegal to include them in contracts with small businesses. This will reduce the current imbalance in negotiating power between small and large businesses and reduce exposure to uninsured losses.

What about contracts signed before 12 November 2016?
Big business can continue to use contracts with unfair terms until 12 November. If you feel like you’re being pressured to sign something now, this might be why!

If you sign a contract before 12 November 2016, it will be harder to challenge any unfair contract terms – but you should try.

If an existing contract continues after 12 November 2016, ask for changes now to redress the imbalance in the indemnity and other clauses. If that’s not possible, the new laws will only apply to the contract, when it is renewed, varied or extended after 12 November 2016.
.
*Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015

Author: Charmian Holmes

Yangtze cruise ship disaster will cost insurers

By | Insurance, Legal, News

The fatal Yangtze cruise ship that capsized and killed more than 400 people last week will cost its insurers about $19.2 million, or 92.5 million yuan, Chinese insurance regulatory authorities disclosed.

The four-deck cruiser, christened the Eastern Star, was hit by a freak tornado on the Yangtze River on June 1. The vessel overturned in about a minute only a few dozen meters from the riverbank, leaving an estimated 442 dead or missing, mostly between the ages of 50 and 80. Just 14 people – including the ship’s captain and first engineer – survived.

China has assembled a 60-member team to investigate the incident, which marks of one of the country’s worst shipping disasters in nearly 70 years.

For insurance companies covering the ship and cruise line, the tragedy will mean a sizable payout. According to a conference held by the China Insurance Regulatory Commission Thursday, insurance companies underwrote 340 contracts for parties involved in the incident that live up to requirements for claims. That includes shipowners, travel agencies, passengers and crew members.

The ship itself, which was owned by the Chongqing Eastern Shipping Corporation, was insured for about 15.7 million yuan by the People’s Insurance Company of China.

The CIRC also included estimates for 12 million yuan of liability insurance for travel agencies, 61.7 million yuan of personal insurance for 396 passengers and 3.12 million yuan of personal insurance for 18 crew members.

Already, the People’s Insurance Company of China has paid 10 million yuan to Chongqing Eastern Shipping Corp.

Despite the scale of the tragedy and timing – the news comes one year after the sinking of a ferry in South Korea that killed 304 people on board, including teenagers on a school trip – the incident is not expected to have much impact on the insurance market or the risk profile for cruise ships.

Affected Chinese insurance carriers rushed to the site of the disaster as divers searched for missing people.

“We have set up emergency leadership groups, rapidly implemented emergency response measures and set small teams who have already rushed to the site,” PICC told Reuters.

Ping An Insurance Group Co. of China and China Life Insurance Co. also sent in emergency response teams and had claims teams on-site to work with clients.  Ping An said it has already identified multiple life insurance customers on board the cruise ship and have contacted family members to cover travel and accommodation costs.

Published 15.06.2015 – www.insurancebusinessonline.com.au

Oceanic Marine Risks

Death Penalty Sought for Ship Captain

By | Insurance, Legal, News

Korean prosecutors on Monday sought the death penalty for the captain of a ferry that capsized in April, leaving 304 people, most of them school children, dead or missing, in a trial of 15 crew who abandoned ship before it sank.

Lee Joon-seok, 68, charged with homicide, should be sentenced to death for failing to carry out his duty, which in effect amounted to homicide, the prosecution told the court before resting its case in a trial that has taken place amid intense public anger.

Sentiment turned sharply hostile after evidence surfaced that the mostly teenage passengers waited in their cabins, obediently following orders, as the crew escaped.

Lee was among 15 accused of abandoning the sharply listing ferry. Four, including the captain, face homicide charges.

The rest face lesser charges, including negligence. A three-judge panel is expected to announce its verdicts in November. No formal pleas have been made but Lee has denied intent to kill.

“Lee supplied the cause of the sinking of the Sewol … he has the heaviest responsibility for the accident,” the lead prosecutor in the case, Park Jae-eok, told the court in the south of the country.

“We ask that the court sentence him to death.”

The prosecutors sought life sentences for the other three charged with homicide and prison terms ranging from 15 to 30 years for the rest.

The Sewol capsized and sank on a routine voyage on April 16, triggering an outpouring of nationwide grief and sharp criticism of the government of President Park Geun-hye for its handling of the rescue operation.

The crew on trial have said they thought it was the coast guard’s job to evacuate passengers. Video footage of their escape triggered outrage, especially after survivors testified they repeatedly told passengers to stay put.

After the prosecution rested its case, Lee apologized to the families of the victims, saying he never intended to harm anyone.

“I will repent until the day I die and ask for the victims’ families’ forgiveness,” he said. “I swear with my hand over my heart, I did not intend to kill anyone. I never even thought of such a thing.”

Most of the crew were represented by state-appointed lawyers, who argued that the defendants were mostly too badly trained to handle the disaster.

Some family members of victims who attended Monday’s hearing had called for the death penalty, but Amnesty International said death was not the answer.

The Justice Ministry said 58 people were currently on death row. The country last carried out executions in December 1997, when 23 were hanged.

“While the South Korean court system has a reputation for being fair, as do other legal systems around the world where the death penalty still exists, public opinion can still creep in,” Amnesty International’s director of research for East Asia, Roseann Rife, said.

“…The Sewol ferry accident was a great tragedy and if negligence or human error was involved, those responsible should be held to account. But the death penalty is not a solution.”

By Ju-min Park (Additional reporting by James Pearson in SEOUL; writing by Jack Kim; Editing by Nick Macfie)

Source: Reuters

SEACOGS Global Marine Industry Portal

SEACOGS is an Australian owned and operated company © 2014 ABN: 64 156 181 887