Legal Practice Notes

Who insures? Joint insurance From a tenant’s standpoint, the preferred arrangement is for the premises to be insured in the joint names of the landlord and the tenant. For the tenant, the key advantages are: both parties are alerted before the policy comes up for renewal or lapses any insurance proceeds are payable jointly to landlord and tenant, giving the tenant influence over how the funds are applied (and therefore over the reinstatement of the premises) there are no detrimental effects if the landlord enters liquidation before reinstatement is carried out the insurers cannot rely on their right of ‘subrogation’ (see Subrogation below) against the tenant for damage the tenant caused or contributed to Nevertheless, in many cases arranging insurance in joint names will not be practical......

Scope of this Practice Note The Financial Services Authority’s ( FCA) rules in chapter 4 of the Conduct of Business sourcebook ( COBS 4) broadly apply to firms when interacting with a client or prospective client while conducting designated investment business or Mi FID, equivalent third-country or optional exemption business, and when issuing or approving a financial promotion concerning investment business. These provisions apply as appropriate and where relevant across such activities. This Practice Note flags matters the FCA considers material regarding the assembly of a financial promotion, so as to ensure it meets the regulatory requirements set out in chapter 4 of the FCA’s Conduct of Business Rules ( COBS 4). For more on what amounts to a financial promotion, refer to Practice Note: The financial promotion regime—essentials......

ARCHIVED: This Practice Note was archived and is not maintained. The war in Ukraine, together with measures imposed by and upon Russia, has upended global business operations, unleashing widespread and significant supply chain shocks, halts to day-to-day activity, and the forfeiture of assets located abroad. International retailers, manufacturers, service providers and technology firms have scaled back, exited, or are in the process of exiting their Russian operations. Losses reportedly exceed US$59bn. Notably, Russian entities leasing aircraft from international companies have not returned the planes after lease terminations. Interruptions in the flow of strategic metals, including neon used in microchip manufacture—produced in Russia and refined in Ukraine—have generated severe losses for both business partners and participants across the supply chain. Diminished agricultural output from Ukraine, together with the loss of agricultural inputs from Russia, such as potash, has tightened global grain supplies and is...

Insurance & Reinsurance case tracker—2018 [ Archived] ARCHIVED: This resource has been archived and is no longer being updated. It collates insurance-related litigation in the High Court, Court of Appeal, Supreme Court and the Court of Justice of the European Union (including both the General Court and the Court of Justice). Drawn from our monitoring and examination of relevant proceedings, and at times reports from our own court correspondents, the tracker brings key cases together swiftly in one place. It records the status of matters covered since January 2018, including upcoming hearings, and ordinarily received updates every fortnight. Abbreviations European Court of Justice/ Court of Justice of the European Union — ECJ Court of Justice of the European Union — General Court — CJEU- GC Supreme Court — SC Court of Appeal — CA High Court — HC Privy...

Why is the exemption for financial services important? VAT is a significant concern for firms in the financial sector, as supplying certain categories of financial services to customers belonging in the UK is exempt from UK VAT. This matters because: businesses will not levy VAT on services within the exemption; and such businesses cannot recover input VAT on supplies they receive while making an onward exempt supply The intermediary exemption for financial services Financial services supplies often involve other businesses serving as intermediaries between the parties requesting and delivering the services. Further parties may participate in a financial services transaction, for example by offering specialist advice or helping to ensure the deal proceeds. These services are VAT-exempt where the supplier: operates in an intermediary capacity provides intermediary services in relation to certain specified financial services transactions (whether or not the...

What is subrogation? Subrogation is an equitable device designed to prevent unjust enrichment by allowing one party to step into another’s position and pursue a claim in that person’s name. For further guidance on unjust enrichment generally, see Practice Notes: Unjust enrichment—elements of the claim Unjust enrichment—defences When might subrogation arise? The term subrogation is a convenient description of a transfer of rights from one person to another, occurring by operation of law in a wide range of circumstances, and happening without assignment or the assent of the person from whom the rights pass. Some rights arising by subrogation have a contractual origin, as in the context of insurance contracts. Reflecting many differing situations recognised by the operation of law......

Nature and purpose of P& I insurance Protection and indemnity ( P& I) insurance is a niche liability policy purchased by shipowners, certain charterers, and others involved in the commercial running of deep-sea vessels. Its core role is to compensate shipowners for third-party claims and to bridge gaps where other marine policies, including hull and machinery or war risks covers, do not respond. To call at or depart from most ports worldwide, ships—or at least those above defined minimum tonnages—must hold liability cover or comparable financial guarantees for specified classes of claims. In practice, merchant fleets meet these obligations through P& I cover. P& I insurance is, therefore, an essential partner to international trade. P& I Clubs and the International Group of P& I Clubs P& I insurance traces its roots to the 18th and 19th centuries, when shipowners formed associations to mutually insure...

In the wake of the 2008 banking crisis, the government overhauled the UK financial services regulatory framework. One significant outcome was the creation of the Prudential Regulation Authority (the PRA). As a legally separate subsidiary of the Bank of England (the Bank), it is accountable to the Bank's Court of Directors. The PRA's chairman and chief executive are both Bank executives. For further detail on the PRA's set-up, see Practice Note: Prudential Regulation Authority—structure, functions and duties. The PRA is responsible for micro to prudential regulation of firms that undertake PRA-regulated activities. The Financial Conduct Authority ( FCA) acts as the prudential regulator for firms that do not undertake PRA-regulated activities, and is the conduct regulator for all firms prudentially regulated by either the PRA or the FCA. The purpose of this Practice Note is to explain which regulated activities...

This Practice Note Explores the allocation of risk and the insurance obligations within the NEC Engineering and Construction Contract ( ECC). It identifies the insurances each party is expected to maintain, including Contractor’s All Risks insurance and public liability cover, and indicates the scope of cover to be in place... For wider context on NEC3 and NEC4, and how insurance is addressed under other standard forms, see: Practice Note: NEC contracts—introduction Practice Notes: JCT contracts—insurance, FIDIC contracts 2017—insurance and FIDIC contracts (pre-2017 editions)—insurance This guidance applies to both the NEC3 and NEC4 editions of the ECC. For consistency, the term ‘ Client’ is used throughout, aligning with NEC4 usage for the developer/employer (the NEC3 ECC uses ‘ Employer’). For defined NEC expressions, refer to Practice Note: NEC contracts—glossary. Where no distinction is made between clause numbers, all clause references in this Practice Note are...

This Practice Note sets out an overview of Lloyd’s of London, alongside its governance and regulatory architecture. It explains how members and managing agents place insurance and reinsurance, and maps the Society of Lloyd’s various connections with members, managing agents, members’ agents, syndicates, brokers and coverholders. It also looks at Lloyd’s of London’s overall capital model, commonly called the Chain of Security, and gives a brief outline of the Society’s investigatory and enforcement powers. What is the Lloyd’s market? The Lloyd’s market is an insurance marketplace tracing its roots to the seventeenth century. Traders gathered at Edward Lloyd’s coffee house in London, arranging insurance cover for one another’s ventures. As global commerce moved largely by sea, until late in the nineteenth century the risks insured at Lloyd’s were almost entirely marine. Today, the Lloyd’s market underwrites risks across most classes of business. At Lloyd’s,...

What is a captive? Captive insurance is a self-insurance approach. A captive insurance company, put simply, is an insurer or reinsurer owned by the ultimate policyholder (or reinsurance policyholder) whose exposures it covers. As a regulated (re)insurer in its home jurisdiction, a captive can accept risks like any other market participant; however, its defining feature is that it writes risks arising solely or largely from its corporate owner or within its wider group. HM Treasury notes that, in 2021, there were about 7000 captives worldwide, with premiums of roughly US$69bn. Captive arrangements span the spectrum from straightforward to highly intricate. The most basic model is a single company owning a single captive to which it insures its risks. More layered designs may see risks ceded to a fronting insurer (typically an independent third party) and then reinsured back to the...

Tenants often undertake fit-out works at, or even before, the commencement of a lease. They might also complete refurbishment or additional fit-outs during the term. Fit-outs are usually internal and non-structural, while refurbishments can be more extensive. On occasion, tenants may wish to carry out major structural alterations, such as: combining units by removing internal walls installing staircases/escalators between floors adding roof canopies constructing extensions Whatever the nature of the tenant’s works, both landlord and tenant must consider the insurance implications. The landlord’s insurance position During works Typically, a landlord’s policy will only insure the works once finished, and even then often only where they become part of the insured property (for example, structural elements) rather than interior fittings. Accordingly, the landlord should require the tenant to insure the works during construction. This obligation should appear in the licence for...

Standard building contracts typically set out which liabilities sit with the contractor or the employer, and who must insure them. See, for instance, Practice Notes: JCT contracts—insurance, NEC contracts—insurance, FIDIC contracts (pre-2017 editions)—insurance, and FIDIC contracts 2017—insurance. Where a building contract is made orally, or the written terms omit such matters, the common law position applies. They allocate risk and specify the party responsible for insurance. What are the contractor's potential liabilities? liability in tort to third parties for injury, death or damage to property arising from the contractor’s negligence (see Practice Note: Negligence in construction); liability to the employer for loss or damage to the works caused by the contractor’s own negligence, or for breach of contract (see: Contract law for construction lawyers—overview). The contractor is not responsible to the employer where the works suffer damage from any cause other than the...

This Practice Note offers guidance on subrogation in the insurance context. It sets out the legal basis, purpose and practical operation of subrogation, and indicates how to tell rights of subrogation apart from other mechanisms such as assignment or contribution. It also considers common situations, including subrogation against co-insureds, the use of express subrogation clauses and waivers of subrogation. In addition, it covers how recoveries are allocated and the insured’s duty to co-operate with insurers. What is the right of subrogation? In insurance and reinsurance, the right of subrogation allows an insurer or reinsurer, once it has indemnified the (re)insured, to step into that party’s position and bring proceedings in the (re)insured’s name. For this Practice Note, ‘insurer’ should be read as ‘(re)insurer’ and ‘insured’ as ‘(re)insured’. The insurer may then exercise any of the insured’s rights or remedies against third parties arising from the...

Introduction In ship finance, the typical security package comprises a mortgage over the vessel—supplemented, in jurisdictions that rely on a short form statutory mortgage such as the UK, by a separate deed of covenant—and an assignment (often termed a 'general assignment') of the vessel’s insurances, earnings and any requisition compensation (for further details on the forms of security commonly used in shipping finance transactions, see Practice Note: Shipping finance—security and Precedent: Deed of covenant: for a ship mortgage). Taking discrete security over insurances and earnings is especially important in shipping finance because the borrower is commonly a single ship-owning company that generally has no material assets other than the vessel together with its insurances and income. In most jurisdictions, including the UK, a mortgagee of a vessel does not automatically obtain any security interest in the ship’s insurances......

Entitlements arising under insurance policies constitute contractual rights. A lender may obtain security over an insurance policy through an assignment granted as security, effected by way of security. Additional protections can also be deployed in relation to insurance, including noting the lender’s interest on the policy or arranging co-insurance status for the lender. These alternatives take varied forms and deliver distinct advantages to the lender. This Practice Note concentrates on the issues that arise when taking security over rights under insurance policies. For general guidance on securing contractual rights, refer also to Practice Note: Taking security over contractual rights in general. Nature of insurance policies Rights arising under insurance policies are intangible assets rather than physical property. They sit within the class of contractual rights. Such a right is a chose in action (or thing in action), that is to say, a claim...

What is environmental insurance? Environmental insurance shifts risk by indemnifying the policyholder for losses arising from potential environmental liabilities. For property-focused cover, the insured might be the purchaser, the vendor, or both. A standalone environmental policy is often necessary because public liability insurance commonly excludes environmental liabilities, except for sudden, unintended and unexpected pollution incidents. In addition, public liability usually responds only to third party damages and not to remediation of the insured’s own property. On-site remediation Off-site remediation Civil disputes Legal expenses Role of insurance Securing insurance can enable transactions or developments to progress where environmental risks and liabilities exist, by providing financial security and reducing uncertainty. It places the burden of liability with a suitable third-party insurer. Insurance can also support operators of high-hazard facilities in making financial provision for environmental loss. Key...

Aggregation—background Aggregation continues to pose a significant challenge when settling insurance and reinsurance claims, spawning numerous market disputes. Claims managers, arbitrators and even appellate courts often adopt differing interpretations of what particular policy wordings seek to achieve within an aggregation clause. After a run of rulings on familiar aggregation wording in the late 1990s and early 2000s, matters grew quieter. The final waves of litigation arising from the 9/11 tragedy, alongside clusters of solicitors’ and medical negligence claims, illuminated the modern approach to aggregation. More recently, the wealth of insurance disputes sparked by the coronavirus ( COVID-19) pandemic—predominantly concerning business interruption losses—has given the courts a platform to revisit the relevant principles. What are aggregation clauses? An aggregation clause is a familiar feature of insurance and reinsurance contracts, allowing two or more separate losses covered by the policy to be treated as a single loss for the...

Overview Within civil litigation, defendants in personal injury matters most often rely on surveillance material. Its purpose is to expose any gap between the claimant’s asserted impairments following the index accident and reality. The Civil Procedure Rules ( CPR) contain no standalone rules for such material; a recording is treated as a document, so CPR 31 applies. There are three particular features of surveillance evidence that prompt specific considerations: surprise—its value lies in capturing the claimant carrying out activities when they have no expectation of being observed by, or for, the defendant; advance warning must accordingly be avoided secrecy—it is likewise crucial the claimant is not made aware that they are being watched; however, there are bounds to how far a defendant ought to go to obtain such material timing—its forensic force is in weakening the claimant’s case, so the...

An activity counts as a regulated activity only when it is undertaken by way of business in the UK. The Financial Services and Markets Act 2000 ( FSMA 2000) does not define that phrase, so it retains its ordinary meaning. Deciding whether an activity is conducted by way of business is ultimately a matter of judgment. There are, nonetheless, particular circumstances in which activities will be regarded as by way of business, identified for a limited set of activities by the Treasury under its FSMA 2000 powers. This Practice Note outlines how HM Treasury’s interpretation of business applies to those categories of activity. For details on whether an activity is a regulated activity, see Practice Note: What are regulated activities? For further information on the carrying on of regulated activities in the UK, see Practice Note: Territorial scope of the general...