25.11.1 If insurance for a term or condition (as opposed to a risk (see Section 25.10)) is no longer available, subject to the unavailability of such term or condition not being attributable to the actions of the Contractor or a sub-contractor, the Contractor should not be obliged to take out insurance in respect of that particular term or condition. Accordingly the Authority should not terminate for a Contractor Default (see Section 21.2) in this situation. Such unavailability will instead be treated like a Relief Event. Uninsurability protection under Clause 25.10 should not be offered by the Authority where any particular term or condition in the Required Insurance Schedule (including deductibles at levels above the maximum level stated in the required insurance schedule) is unavailable.
25.11.2 If insurance is no longer available for a term or condition included in the Contract as a Required Insurance, the parties may agree that the Unitary Charge should be reduced to reflect the extent to which the insurance premium payable by the Contractor is lower than it would have been had insurance been effected for the particular term or condition. Whilst the increased risk further to unavailability of a term or condition may reside first and foremost with the Contractor, the Authority's exposure is likely to be increased, as there may be certain circumstances where the Authority bears the risk e.g. where an aggrieved party brings a claim against the Authority for an act committed by the Contractor, but insurance proceeds to cover the claim are no longer available on account of the unavailability of a term or condition. The extent to which the Authority may be exposed will depend in part on the indemnity provisions. In addition where there is such a loss, then if the Contractor elects not to reinstate the loss, then depending on the size of the loss, it is possible that the Authority would not be able to terminate for Contractor Default, and be forced to accept instead a reduced service. Given that an Authority's potential exposure will depend on contractual provisions, some of which may be project specific, an adjustment to the Unitary Charge further to unavailability of a term or condition is not mandatory. It is for the Authority to determine, in conjunction with the insurance and legal advisors whether the Contract should contain a unitary charge adjustment provision. If it is determined that this provision is appropriate then suggested language is included in 25.11(d) and (e) below.
25.11.3 If a term or condition is not available, the Contractor should determine whether an alternative term or condition could, either wholly or partially, replace the term or condition which is unavailable. If appropriate and available on a commercially viable basis, the alternative term or condition should be procured.
Required drafting is as follows:
"Insurance Term" means any terms and/or conditions required to be included in a policy of insurance by Clause 25.2 and/or Schedule [ ] (Required Insurance Schedule) but excluding any risk.
25.11 Uninsurable Risks
(a) If, upon the renewal of any insurance which the Contractor is required to maintain or to procure the maintenance of pursuant to this Contract:
(i) any Insurance Term is not available to the Contractor in the worldwide insurance market with reputable insurers of good standing; and/or
(ii) the insurance premium payable for insurance incorporating such Insurance Term is such that the Insurance Term is not generally being incorporated in insurance procured in the worldwide insurance market with reputable insurers of good standing by contractors in the United Kingdom,
(other than, in each case, by reason of one or more actions of the Contractor and/or any sub-contractor of the Contractor) then paragraph (b) shall apply.
(b) If it is agreed or determined that paragraph (a) applies then the Authority shall waive the Contractor's obligations in Clause 25.2 and/or Schedule [ ] (Required Insurance Schedule) in respect of that particular Insurance Term and the Contractor shall not be considered in breach of its obligations regarding the maintenance of insurance pursuant to this Contract as a result of the failure to maintain insurance incorporating such Insurance Term for so long as the relevant circumstances described in paragraph (a) continue to apply to such Insurance Term.
(c) To the extent that the Parties agree (acting reasonably), or it is determined pursuant to the Dispute Resolution Procedure, that an alternative or replacement term and /or condition of insurance is available to the Contractor in the worldwide insurance market with reputable insurers of good standing which if included in the relevant insurance policy would fully or partially address the Contractor's inability to maintain or procure the maintenance of insurance with the relevant Insurance Term, at a cost which contractors in the UK are (at such time) generally prepared to pay, the Contractor shall maintain or procure the maintenance of insurance including such alternative or replacement term and/or condition. Notwithstanding any other provision of this Contract, the costs of such insurance shall be subject to the premium costs sharing mechanism set out at Schedule [A] [Insurance Premium Risk Sharing Schedule].
(d) [Where the Authority has exercised the waiver pursuant to paragraph (b), it shall be entitled to deduct from the annual Unitary Charge the "Adjusted Amount", such amount being an amount equal to the amount paid for the particular Insurance Term in the preceding year (using a reasonable estimate of such amount where a precise figure is not available) less any annual amount paid or payable by the Contractor to maintain and/or procure the maintenance of any (whether full or partial) alternative or replacement insurance in respect of such Insurance Term pursuant to paragraph (c).] 491
(e) [While paragraph (a) applies, the annual Unitary Charge shall be reduced each Contract Year by the Adjusted Amount, Indexed from the date that the particular Insurance Term is no longer available.] 492
(f) The Contractor shall notify the Authority as soon as reasonably practicable and in any event within five days of becoming aware that paragraph (a)(i) and/or paragraph (a)(ii) are likely to apply or (on expiry of the relevant insurance then in place) do apply in respect of an Insurance Term (irrespective of the reason for the same). The Contractor shall provide the Authority with such information as the Authority reasonably requests regarding the unavailability of the Insurance Term and the parties shall meet to discuss the means by which such unavailability should be managed as soon as is reasonably practicable.
(g) In the event that paragraph (a)(i) and/or paragraph (a)(ii) apply in respect of an Insurance Term, (irrespective of the reasons for the same) the Contractor shall approach the insurance market at least every four months to establish whether paragraph (a)(i) and/or paragraph (a)(ii) remain applicable to the Insurance Term. As soon as the Contractor is aware that paragraph (a)(i) and/or paragraph (a)(ii) has ceased to apply to the Insurance Term, the Contractor shall take out and maintain or procure the taking out and maintenance of insurance (to be incepted as soon as is reasonably practicable) incorporating such Insurance Term in accordance with this Contract.
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491 See Section 25.11.2
492 See Section 25.11.2