Appendix A

LGA/ABI joint guidance

Local Government Association

Ad hoc inquiries : Insurance Aspects

1.                                 Before setting up an inquiry, the local authority should consider the possibility that any of the issues under inquiry might be the subject of an insurance indemnity.

2.                                 Often there will be no insurance element involved. It is impossible to give comprehensive guidance as to when there will or will not be such an issue to consider; each case has to be looked at in the light of its own circumstances. Where the subject matter of the inquiry involves personal injury (including illness, mental anguish or stress), or damage to property not belonging to the authority, it is recommended that the local authority makes an initial presumption of probable insurance involvement

3.                                 If there is (or is likely to be) insurer involvement, early liaison with the insurer(s) is strongly recommended. Note that:

(a)     the insurer(s) concerned will usually be the insurer(s) on risk when the injury or damage occurred. These may not be the same as the local authority’s current insurers. Actual injuries sustained, or the time they were caused, may have been spread over many years, and involve different insurers;

(b)     it is for the authority alone to decide whether or not to hold an inquiry. Insurers would not expect or wish to be involved in such a decision, though it is important that the authority informs the insurer of its decision.

4.                                 It is important to ensure that the contents of the report of an inquiry are accurate and reasonable, and can be sustained. A report might prejudice the position of an insurer, for example if it makes inaccurate statements regarding liability and the entitlement of individuals to compensation. This risk of this happening can be mitigated by:

(a)     restricting the inquiry’s terms of reference to findings of fact and recommendations for the avoidance of a recurrence;

(b)     instructing the inquiry that comment, opinion or criticism should only be introduced into its report if it is justified; to avoid introducing any inference or supposition into its report; and to ensure that any unproven allegations and unsubstantiated statements are represented as such;

(c)     ensuring that the inquiry avoids reference to liability or matters of compensation; these issues should be strictly reserved to the authority liaising with the insurer(s).

Protocol and public statements

5.                    a)             The local authority and insurer(s) should meet early on to seek a full understanding of each other’s position and concerns, including informing each other of key developments, or key statements they propose to make, particularly where sensitive issues are involved.

b)     It is recommended that the local authority and insurer(s) seek to agree a protocol. Elected members should be fully informed and support the protocol; it may be beneficial for relevant members to be involved in meetings with the insurer(s). These meetings can be used to identify the true legal position, which is equally binding on local authorities and insurers. The opportunity can also be taken to acquaint the insurers with any particular sensitivities on the part of the authority and its members.

6.       A protocol should identify:

a)  who is authorised to speak officially, and to the press.

It is for the local authority and the insurer(s) individually to decide who their respective spokesperson will be. If a joint statement is appropriate, a joint spokesperson should be agreed.

b)  the extent to which (if at all) liability should be admitted.

Where there are unsubstantiated allegations or incomplete information, the local authority should proceed with caution. Detailed investigation will often reveal a very different state of affairs from that indicated by initial observation.

In any circumstances where an admission of liability is contemplated, the local authority is advised to ensure full liaison with insurers before making any admission. All correspondence on the matter should be addressed “without prejudice”.

If an insurer finds its position so prejudiced by an ill informed admission of liability, it may seek to rely on the policy condition that allows it to avoid providing an indemnity in such circumstances. This could result in the full amount of any damages awarded having to be met by the authority.

The more remote in time and the more complex the issues the greater the caution needed by the authority. If the incident is very recent and the position clear cut, then insurers may wish to admit liability and get on with quantification and settlement.

c)     expressing sympathy - phraseology and general approach to be adopted.

Avoid emotive language, but do not feel that an expression of sympathy cannot be made. A simple expression of sympathy for the affected parties and their families, coupled with an announcement that a full investigation is to be held into the circumstances, can be an appropriate response and does not amount to an admission of liability. Something on the lines of “Z Council expresses its sympathy to the people affected and their families and will be making a full investigation into the circumstances” should be appropriate and cause no harm.

Local Government Association

September 1999

(annexed to LGA Circular 631/99)