Higher Education Institutions may be considering stepping in to assist front line service providers with production of desperately needed supplies, in particular Personal Protective Equipment (PPE).
In doing so institutions should consider the insurance implications of their actions.
Two insurances of particular importance are:
- Professional Indemnity covering your liability for erroneous design leading to the product failing and subsequently causing financial loss to a third party.
- Public & Products Liability covering your legal liability for injury or damage to third parties and third parties’ property due to the product having been negligently manufactured.
The likelihood of insurance cover being in place in certain circumstances will depend on specific policy clauses and the decisions taken by insurers. Whilst we cannot pre-empt the likely interpretations and claims decisions of insurers, we have put together a brief summary of guidance on our views in respect of these to two types of covers. For more detail please refer to our ‘Higher Education coverage and COVID-19 update’, available on our website.
Professional Indemnity
A standard exclusion in Professional Indemnity policy wordings relates to claims arising from the supply of goods by or on behalf of the Insured or products manufactured constructed altered repaired treated sold supplied or distributed by or on behalf of the Insured. The supply of a Prototype or a refinement of a Prototype will not ordinarily be deemed to be included in this exclusion.
This reflects the expectation insurers will have that universities are actively involved in design of Prototypes, so that forms a normal part of a university’s activities, whereas insurers do not expect Universities to be actively involved in the physical production and supply of the finished product. Furthermore, if the university is making designs available to other manufactures the failure of any part of the design of their product (not an error in the manufacturing), would then likely rest with the Professional Indemnity insurer.
Public & Products Liability
Exposures are focused on whether the product produced is suitable and fit for its intended purpose and whether there is any prospect of the aforementioned injury or damage to third parties and third party property. Most importantly, this could include claims being brought against the institution for serious disease or even death as a result of use of the product.
Whilst insurer’s policy wordings may not include a specific exclusion for Products Liability, as with Professional Indemnity, Public and Products Liability insurers do not view mass production of any product to form part of a university’s normal business activities unless this is declared to and accepted by them. /p>
Currently organisations do not have the luxury of ensuring contract terms are agreed before production starts. In the event of issues arising, Courts will need to decide on the facts presented to them and ultimately be the arbiter of where liability lies. If organisations wish to rely on the protection of their insurance, it is, therefore, essential that a proposal to commence production of any equipment, whether PPE or otherwise is referred to underwriters for individual consideration immediately.
Would you like to talk?
If you wish to discuss any concerns you may have regarding proposed developments within your institutions please contact your Gallagher representative.
