How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Joshua Your Own Question
Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25424
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
35043042
Type Your Law Question Here...
Joshua is online now

In agreeing a contract for services, my contract contains a

Resolved Question:

In agreeing a contract for services, my contract contains a clause that indemnified the other party should a claim be made on my Ltd company for an amount greater than the £1m of PI insurance I carry. Does this not make a mockery of the limitation on liability of the Ltd co structure and the need to carry a specified level of PI insurance?
Submitted: 3 years ago.
Category: Law
Expert:  Joshua replied 3 years ago.

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

Is this a personal guarantee please or an indemnity given by your company?

Customer: I have a limited company called Praetorian Projects Ltd. The contract is between Anchura Partners Services Ltd and PP Ltd with me as the named 'individual' who provides the services. My PI insurance is for £1m and is in the name of PP Ltd
Joshua :

Thanks. And is it the "Individual" you provides the indemnity or PP Ltd in the contract?

Customer: If any claim is brought or made by Anchura against the Consultant Company in respect of which the Consultant Company would be entitled to receive indemnity under any of the Insurance Policies, the Consultant Company warrants and agrees that it shall procure that the relevant insurer shall make any payments under the Insurance Policies directly to Anchura. The Consultant Company further warrants and agrees that it shall make good any deficiency from its own resources.
Customer: the last sentence is the one I have issue with
Joshua :

thank you. They are not asking you to personally indemnify the other party. They are asking your company to provide the indemnity and therefore the indemnity will be limited to your company's liability rather than your own. This is not unreasonable because from the other party's perspective, your company is responsible for the work it carries out and is responsible for carrying sufficient insurance to cover the work. Some agreements contain personal indemnify clauses which makes the example you personally liable which are very unwise to agree to but it is quite usual for your limited company to be liable for work it carries out and to ensure it has adequate insurance cover to manage that liability. In fact the position would be much the same even without the clause

Joshua :

if you are keen to limit your company's liability then you would wish to change the clause he referred to above to provide for a specific limit of liability not to exceed the amount covered by your insurance policy have my feeling would be that the other party would not accept such a provision that such a provision would be unusual

Customer: I just don't want to be exposed over and above the insurance I have taken out
Joshua :

the proposal does not make a mockery of the limited company liability structure you refer to because your liability would be limited to your company's liability and as you will be aware, except in certain very restricted circumstances, you were not personally liable for your companies liabilities unless you give a personal guarantee.

Customer: Ok, thanks
Joshua :

what is very important you are very cautious of is personal guarantees or indemnities of any kind as these run roughshod through limited company liability. Personal guarantees are often required by banks and other credit providers and a judgement call needs to be made in the circumstances they were least you have some control in terms of the amount of potential credit you are taking on. Liability clauses in contracts of this sort in my view should be avoided at all costs as potential exposure could have life changing impact. However providing you are satisfied that you have ample insurance, for the work you are carrying out, closes such as the above should not present difficulty is should in a worst-case scenario, you find that your insurance does not cover the potential exposure, the liability would be limited to your limited company and not you personally

Joshua :

is there anything above I can clarify for you?

Customer: No thanks, XXXXX XXXXX been helpful
Joshua :

A pleausre. I hope all goes well with your contract.

Joshua :

If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me though

Customer: Ok
Joshua :

Many thanks.

Joshua and other Law Specialists are ready to help you