Contact: Michelle Smith, ext 6666 and Christine Buckett ext 7313

1 Summary

The following decision is sought:

* that the Cabinet endorse the actions of the Risk Management Board in
in relation to the level of insurance contractors are required to have
when undertaking work for the County Council.

_ that a further report on progress and the impact of the actions be submitted to the Cabinet in June 2002.

2 Reasons for the recommendation

* to ensure that the County Council is fully indemnified against losses
for injury and damage arising from negligence of contractors.

3 Other options considered and rejected
Not applicable.

4 Conflicts of interested declared by the decision maker, or a member or officer consulted.
None

5 Dispensation granted by the Standards Committee
Not applicable

6 Reasons for matter being dealt with, if urgent
Not applicable.

Approved by the Cabinet Date

............................... .......................

Councillor T.K. Thornber, CBE
Chairman

7 Introduction

7.1 The purpose of this report is to explain the background to the recent increase in levels of insurance cover that contractors are required to provide when working for the County Council.

7.2 As part of the development of a comprehensive Risk Management Strategy for the County Council, this issue has been the subject of detailed discussion by the Risk Management Board and is still under review.

8 Background

8.1 All contracts that are entered into by the County Council include the condition that the contractor indemnify the County Council against all losses and claims for injury and damage arising out of the negligence of the contractor (and its sub-contractors) in the performance of the contract. The County Council's standard Forms of Contract contain these provisions and it is normal for the County Council to stipulate the minimum level of insurance that contractors must hold to cover the indemnity.

8.2 The level of insurance is reviewed from time to time to ensure that it is sufficient to cover the possible liability. The risk of a contractor having insufficient cover is that the County Council will have to pick up liabilities that are not covered by the contractor's insurance.

9 Increased Requirements

9.1 The levels of insurance were considered by the Risk Management Board at its meeting on 10 May 2001. It was agreed that the levels be increased as follows: £m £m

Public liability 5 10
Employers' liability 10 10
Products liability 5 10
Professional liability 3 5
Motor - personal Unlimited Unlimited
- property 5 5

9.2 With regard to Public Liability, this had last been increased 5 years ago from £2m to £5m. At that time, a dispensation was given to allow smaller contractors to increase their insurance from £2m to £3m. Reduced limits had also been approved for professional indemnity insurance where the risk was assessed at less than £3m.

9.3 The increases agreed by the Board were based on the rise in awards being made by the Courts and information on the level of cover required by a number of other local authorities.

9.4 At the time the Risk Management Board recognised that for some small contractors the increase could prove difficult and it may lead to having to pay an increased price under the contract. It was agreed however to proceed with the increase and should problems be encountered, the Risk Management Board would review the levels. The new levels were therefore introduced.

10 Issues Raised

10.1 Following the introduction of the new rates, a number of departments raised concerns in relation to particular areas of activity. The main concerns raised were that certain contractors may have difficulty obtaining the increased level of cover and, where they did, this could result in an increased cost to the service, specifically:-

· more time was needed to complete the exercise of seeking new levels of insurance from consultants, contractors and suppliers and that in the case of small specialist consulting firms, a lower level of professional indemnity and public liability be agreed on a case by case basis;

· a number of school transport operators had indicated that they may not be able to get the level of cover stipulated and this could impact on the number who would be able to tender to provide the service. Some farmers who provide snow plough cover said they may have difficulty with the level of cover;

· obtaining the level of cover for activities such as placing skips on the highway, road opening agreements, planting on the highway, small enhancement projects (especially by voluntary organisations and private householders) could prove difficult;

· schools who do not use approved contractors may find the contractors do not have the level of cover required;

· The Care Standards Act covering the provision of residential and day care services for Social Services does not specify a level of public liability cover at present, but contractors are likely to try and establish £5m as the industry norm. If this becomes so, despite the level of risk, then it will not be possible to increase the level without this impacting on the County Council's ability to provide residential and domiciliary care.

10.2 The Risk Management Board considered the matter again at its meeting on 10 September taking into account the concerns raised by departments. A range of options was discussed and the Risk Management Board agreed the following.

* That in respect of small specialist contracting works or indemnities
for work on the highway where for good reason a potential contractor
or householder is unable to obtain the required level of insurance, the
Chief Executive be authorised to approve lower levels of insurance
sufficient to protect the County Council's position, provided a risk
assessment has been undertaken in respect of the proposed works.

* The impact of the change on school transport tenders be monitored
and reported back to the next meeting of the Board.

* The Chief Executive negotiate with insurance brokers to arrange
`top-up' insurance cover for contractors to buy into should they have
difficulty obtaining the levels required through their own insurers.

* The increase in relation to residential and day care providers be
investigated further and reported to the Board.

* A sub-group was asked to investigate the feasibility of developing a
generic risk assessment which could be used to determine different
levels of cover for different activities as a way of restricting the work
that certain contractors can undertake should they not be able to get
the level of cover required.

* Other local authorities to be contacted to check whether they have had
similar problems and how these have been resolved.

10.3 Members will be aware that schools have extensive delegated powers with regard to their budgets and, in agreement with the Director of Property, Business & Regulatory Services (PB&RS), undertake a number of local building works and contracts on their own. The Director of PB&RS has begun discussion with representatives of headteachers with a view to establishing a risk assessment process, which would allow schools to undertake local risk assessments where they are organising and funding the works. This process is also in line with emerging best practice for health and safety reasons.

11 Conclusion

As can be seen from the above, this issue is still under review and is due to be considered again at the next meeting of the Risk Management Board on 15 November 2001. Where concerns are raised by departments, these are and will continue to be addressed in order to achieve the correct balance between protecting the liability of the County Council and providing good cost-effective services.

12 Recommendation

The Cabinet is asked to endorse the actions of the Risk Management Board.