MOFS Guide to Legal Indemnity Insurance - Flipbook - Page 16
Losses for Renewable Projects & Sites
As mentioned earlier, it’s extremely important to
accurately determine the correct limit of indemnity
and supply this to insurers with a description of
what it represents.
When it comes to renewable projects, it’s
particularly important to determine precisely what
losses the operators will suffer in the event of a
claim and apply these to the policy wording at
For some risks, however, standard ‘heads of loss’ do not apply and so
the cover needs to be restructured accurately to cover the likely losses
the Insured would suffer in the event of a claim.
A great example of this is behaviour covenants. If you consider a tenant
taking a lease of a unit to operate as a convenience store, suppose
this unit is burdened by a covenant stating the unit cannot be used as
a shop. The risk to the Insured is a third party coming forward with an
injunction, seeking to prevent the operation of the unit as intended.
The tenant is simply not going to suffer from some of the main heads
of loss, for example a reduction in market value, but if they can’t trade
they are going to suffer Business Interruption costs, they will still need
to pay rent to the Landlord, and if they end up vacating as a direct
consequence of the covenant, they will have potentially wasted lots of
money on their own internal fit-out and more.
By determining what these various losses are (or are likely to be) in
advance, and supplying the underwriter with an explanation of each,
cover can be carefully crafted to cover these specific figures, ensuring
the Insured is properly covered should something go wrong.
The types of loss that can be covered by the Insurer can be
summarised as follows, although underwriters can consider other
potential costs which could be incurred on a case by case basis:
•Abortive costs – for example costs that the Insured has already
incurred or contracted to incur on any development works in
accordance with the Insured Use, including acquisition and/or
purchase cost of all turbines/solar panels etc. and all associated
equipment and infrastructure, professional fees, groundwork,
construction, grid connection or ancillary infrastructure, which is
wasted because of a claim due to the defect in title.
•Costs that the Insured incurs in dismantling the equipment for
preservation, sale and re-use. The Insured is required to offset the proceeds of any sale of the equipment and/or ancillary
•Profit that would have been generated for the Insured by using the
site or if the site is temporarily unable to trade or generate income,
because an injunction is granted on the basis of the Defect in
Title. Generally cover for loss of profit is only available for a limited
period of time, say, two to five years.
Liverpool 0151 255 2600 | Norwich 01603 393 701 | firstname.lastname@example.org