40.12  Consequences of Uninsurability

If the requirements of clause 40.11(b) are satisfied, but the parties cannot agree as to how to manage or share the risk, then:

(a)  in respect of such third party liability insurance only the Authority shall (at the Authority's option) either:

(i)  pay to the Service Provider an amount equal to the amount calculated in accordance with Part 5 of Schedule 22 (Compensation on Termination) and this Agreement will terminate; or

(ii)  elect to allow this Agreement to continue and clause 40.12(b) shall thereafter apply in respect of such risk;

(b)  in respect of such [Service Providers' all risks insurance, property damage insurance, third party liability insurance] (if the Authority elects to allow this Agreement to continue in accordance with clause 40.12(a)(ii)), 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 Authority shall (at the Authority's option) either:

(i)  pay to the Service Provider an amount equal to insurance proceeds that would have been payable had the relevant insurance continued to be available and this Agreement will continue; or

(ii)  pay to the Service Provider an amount equal to the amount calculated in accordance with Part 5 of Schedule 22 (Compensation on Termination) plus (in relation to third party liability insurance only) the amount of insurance proceeds that would have been payable whereupon this Agreement shall terminate;

(c)  where pursuant to clause 40.12(a) or clause 40.12(b) this Agreement continues then the Service Payment 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 the Service Provider in respect of the relevant risk in the year prior to it becoming Uninsurable (Indexed 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

(d)  where pursuant to clause 40.12(a) or clause 40.12(b) this Agreement continues, the Service Provider shall approach the insurance market at least every four (4) months to establish whether the risk remains Uninsurable.  As soon as the Service Provider is aware that the risk is no longer Uninsurable, the Service Provider shall take out and maintain or procure the taking our and maintenance of insurance (to be incepted as soon as reasonably practicable) for such risk in accordance with this Agreement.