36.14
(a) If a risk usually covered by [contractors' 'all risks' insurance, property damage insurance, third party liability insurance, delay in start up and business interruption insurance (but not loss of profits) or statutory insurances] in each case required under this Agreement becomes Uninsurable then:
(i) Project Co shall notify the Board within [5] days of the risk becoming Uninsurable120; and
(ii) if both parties agree, or it is determined in accordance with the Dispute Resolution Procedure that the risk is Uninsurable and that:
(aa) the risk being Uninsurable is not caused by the actions of Project Co or any sub-contractor of Project Co (of any tier); and
(bb) Project Co has demonstrated to the Board that Project Co and a prudent board of directors of a company operating the same or substantially similar PFI businesses in the United Kingdom to that operated by Project Co would in similar circumstances (in the absence of the type of relief envisaged by this Clause) be acting reasonably and in the best interests of the company if they resolved to cease to operate such businesses as a result of that risk becoming Uninsurable, taking into account inter alia (and without limitation) the likelihood of the Uninsurable risk occurring (if it has not already occurred), the financial consequences for such company if such Uninsurable risk did occur (or has occurred) and other mitigants against such consequences which may be available to such company
the parties shall meet to discuss the means by which the risk should be managed or shared (including considering the issue of self-insurance by either party).
(b) If the requirements of Clause 36.14(a) are satisfied, but the parties cannot agree as to how to manage or share the risk, then:
(i) in respect of such third party liability insurance only the Board shall (at the Board's option) either pay to Project Co an amount equal to the amount calculated in accordance with Section C of Part 23 of the Schedule (Consequences of Termination for Force Majeure) and the Agreement will terminate, or elect to allow the Agreement to continue and paragraph (ii) below shall thereafter apply in respect of such risk; and
(ii) in respect of such [contractors' 'all risks' insurance, property damage insurance, third party liability insurance (if the Board elects to allow the Agreement to continue in accordance with Clause 36.14(b)(i)), delay in start up and business interruption insurance (but not loss of profits) or statutory insurances] the Agreement shall continue and on the occurrence of the risk (but only for as long as such risk remains Uninsurable) the Board shall (at the Board's option) either pay to Project Co an amount equal to insurance proceeds that would have been payable had the relevant insurance continued to be available and the Agreement will continue, or an amount equal to the amount calculated in accordance with Section C of Part 23 of the Schedule (Consequences of Termination for Force Majeure) plus (in relation to third party liability insurance only) the amount of insurance proceeds that would have been payable whereupon the Agreement will terminate; and
(iii) where pursuant to Clauses 36.14 (b)(i) and/or (ii) this Agreement continues then the [Service Payment]121 shall be reduced in each year for which the relevant insurance is not maintained by an amount equal to the premium paid (or which would have been paid) by Project Co in respect of the relevant risk in the year prior to it becoming Uninsurable (index linked from the date that the risk becomes Uninsurable). Where the risk is Uninsurable for part of a year only the reduction in the [Service Payment] shall be pro rated to the number of months for which the risk is Uninsurable; and
(iv) where pursuant to paragraphs (b)(i) and/or (ii) this Agreement continues Project Co shall approach the insurance market at least every four months to establish whether the risk remains Uninsurable. As soon as Project Co is aware that the risk is no longer Uninsurable, Project Co shall take out and maintain or procure the taking out and maintenance of insurance (to be incepted as soon as is reasonably practicable) for such risk in accordance with this Agreement.122
(c) If, pursuant to Clause 36.14(b)(ii), the Board elects to make payment to Project Co (such that the Agreement will terminate)(the "Relevant Payment"), Project Co shall have the option (exercisable in writing within (20) Business Days of the date of such election by the Board (the "Option Period")) to pay to the Board on or before the end of the Option Period, an amount equal to the insurance proceeds that would have been payable had the relevant risk not become Uninsurable, in which case the Agreement will continue (and the Relevant Payment will not be made by the Board), and Project Co's payment shall be applied for the same purpose and in the same manner as insurance proceeds would have been applied had the relevant risk not become Uninsurable.
(d) Unavailability of Terms
36.15
(a) If, upon the renewal of any of the Insurances:
(i) any Insurance Term is not available to Project Co 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,
(b) (other than, in each case, by reason of one or more actions of Project Co and/or any sub-contractor of Project Co (of any tier)) then paragraph (b) shall apply.
(c) If it is agreed or determined that paragraph (a) applies then the Board shall waive Project Co's obligations in Clauses 36.1 to 36.3 and/or Part 21 of the Schedule (Insurance Requirements) in respect of that particular Insurance Term and Project Co shall not be considered in breach of its obligations regarding the maintenance of insurance pursuant to this Agreement as a result of the failure to maintain insurance incorporating such Insurance Term for so long as the relevant circumstances described in Clause 36.15(a) continue to apply to such Insurance Term.
(d) 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 Project Co in the worldwide insurance market with reputable insurers of good standing which if included in the relevant insurance policy would fully or partially address Project Co'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, Project Co shall maintain or procure the maintenance of insurance including such alternative or replacement term and/or condition. Notwithstanding any other provision of this Agreement, the costs of such insurance shall be subject to the premium costs sharing mechanism set out at Section 4 of Part 21 of the Schedule (Insurance Premium Risk Sharing Schedule)
(e) [Where the Board has exercised the waiver pursuant to Clause 36.15(c), it shall be entitled to deduct from the annual [Service Payment] 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 Project Co 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 Clause 36.15(d).]123
(f) [While Clause 36.15(a) applies, the annual [Service Payment] shall be reduced each Contract Year by the Adjusted Amount, index linked from the date that the particular Insurance Term is no longer available.] 124
(g) Project Co shall notify the Board as soon as reasonably practicable and in any event within five days of becoming aware that Clause 36.15(a)(i) and/or Clause 36.15(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). Project Co shall provide the Board with such information as the Board 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.
(h) In the event that Clause 36.15(a)(i) and/or Clause 36.15(a)(ii) apply in respect of an Insurance Term, (irrespective of the reasons for the same) Project Co shall approach the insurance market at least every four months to establish whether Clause 36.15(a)(i) and/or Clause 36.15(a)(ii) remain applicable to the Insurance Term. As soon as Project Co is aware that Clause 36.15(a)(i) and/or Clause 36.15(a)(ii) has ceased to apply to the Insurance Term, Project Co 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 Agreement.
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120 The Board may elect to use the following alternative wording: 'the Project Co shall notify the Board of any risk becoming Uninsurable within 5 Business Days of becoming aware of the same and in any event at least 5 Business Days before expiry or cancellation of any existing insurance in respect of that risk'.
121 Ensure that ties in with defined terms in payment mechanism
122 Additional sub-clauses (v) and (vi) may be added at the Board's discretion as follows :
(v) In respect of any period between the Board receiving notification in accordance with Clause 36.14(a)(i) that a TPL Risk has become Uninsurable and the Board's notification to the Project Co in accordance with Clause 36.14 (b)(i) in respect of such risk then, provided it is ultimately agreed or determined that the requirements of Clause 36.14 (a)(ii) are satisfied in respect of the Uninsurable TPL Risk and subject to Clause 36.14 (b)(vi) below, Clause 36.14 (b)(ii) shall apply in respect of occurrences of the Uninsurable TPL Risk during such period unless the parties otherwise agree how to manage the risk during this period; and
(vi) Clause 36.14 (b)(v) shall only apply provided the Project Co does not unreasonably materially delay (a) agreement and/or determination in accordance with the Dispute Resolution Procedure as to whether the requirements of Clause 36.14 (a)(ii) are satisfied in respect of the Uninsurable TPL Risk and/or (b) meeting with the Board to discuss the means by which the risk should be managed.
TPL Risk should be defined as 'a risk which is required to be insured under the third party liability insurance policy'.
123 See Section 24.10.2 of the Standardisation of PFI Contracts Version 4
124 See Section 24.10.2 of the Standardisation of PFI Contracts Version 4