8.27 The JV will be responsible for taking out appropriate insurance to cover its activities.
8.28 Managing Public Money (Annex 4.5) highlights that although public sector bodies do not generally take out commercial insurance, doing so may be justified in wider markets initiatives. This is because these activities are outside the government's core responsibilities and losses on a department's discretionary commercial activities could reduce resources available for its core activities. It will usually therefore make sense to insure them, so far as cover is available on a cost effective basis. Any goods or services sold to other parts of central government should not, however, be insured.
8.29 A public sector body should seek advice on the appropriate commercial insurances available to protect it against the potential liabilities which could arise from setting up and operating the JV.
8.30 If the JV carries out business or has registered overseas (e.g. such as the USA), liability issues will need thorough examination. A possible route to insulate the public sector body from unforeseen liabilities originating in overseas jurisdictions could be to route its interests in such a JV through a limited liability holding company designed to act as a firewall69.
8.31 Action should be taken to reduce any insured risks and liabilities, e.g. by ensuring that obligations are clearly defined and that there is sound evidence to back any claims the public sector makes about the assets it is contributing to the JV. Nevertheless, the JV or the private sector participant(s) may bring a claim against the public sector body, e.g.:
● for breach of any of its obligations under the JV agreement;
● for breach of any of its obligations under a licence or concession agreement entered into with the private sector participant;
● for breach of any warranty, e.g. relating to ownership of any asset transferred or licensed to the; or
● for a misrepresentation as to the extent and viability of the market for the JV's activities.
8.32 Where a director or officer is also employed by the public sector body, insurance should be taken out in relation to their liabilities as a director or officer.
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69 At the time of writing there is no specific guidance however the extra risks of operating abroad should be considered in line with the approach to risk set out in Managing Public Money.