OUTSOURCING AND PROFESSIONAL RISK IN

FACILITIES MANAGEMENT

Nigel Wood

FACILITIES MANAGEMENT

Nigel WoodDirector

23rd October 2008

Definition of Facilities ManagerWho and HowWho and HowWhat is a Professional?Sources of LiabilityyContractual IssuesInsurance SolutionsExposures

DEFINITION

British Institute of Facilities Management

“Facilities Management is the integration of processes within an organisation to maintain and develop the agreed services which support and improve the effectiveness of its primary activities”

DEFINITION

NIGEL WOOD

“The transfer to a third party of the riskThe transfer to a third party of the risk and responsibility for the management

and implementation of anand implementation of an organisations’s non core activities”

WHO

Hong Kong Jockey Club CapitaHong Kong Jockey Club

UK Atomic Energy Authority

Capita

DTZ Management Services

Derbyshire Police

Bournemouth University

Jones Lang LaSalle

Synergis Management Services

DLA Piper

Highland & Islands Enterprise

Gleeds

Knight FrankHighland & Islands Enterprise Knight Frank

HOW

Those that do itThose that do it themselves

The First Party Facilities Manager

HOW

The Hear No, See No, Speak No ApproachSpeak No Approach

Use a Third Party to Manage Facilities

HOW

The Hybrid Approach

A mix of In House and External – or third partythird party Facilities Management

WHAT IS A PROFESSIONAL

Numerous Definitions Traditional Professions:

D tSpecialist Training/Education

P di ti ti

DoctorsLawyersEngineersA hit tPossesses a distinctive

qualification

A kill d titi

Architects

New Professions:A skilled practitioner

Advice/Design/SpecificationITMarketing

For a FeeManagement ConsultancyMedia ConsultantsFacilities Manager

Sources of Professional Risk (or Liability)

Common Law

Contract

Breach of Statutory Duty

Common Law Duty of Care

Donaghue –vs-StephensonStephenson

1928 Decomposed pSnail in bottle of Ginger Beer

Common Law Duty of DUTY OF CARE

Court introduces concept of a duty ofconcept of a duty of

care

1 Duty to take1. Duty to take reasonable care not to injure your neighbour orneighbour or damage his property

2 Reasonable skill and2. Reasonable skill and care

Contract

DAMAGES RECOVERABLE FOR BREACH OF CONTRACT TERM

GOVERNED BY TERMS OF YOUR CONTRACT

BREACH OF STATUTORY DUTY

GOVERNMENT LEGISLATION

BUILDING REGULATIONSBUILDING REGULATIONS

HEALTH & SAFETY

Contractual Issues

Facility Owner (First Party) Provider of FM Services (Third Party)

Indemnities - YesDuty of Care Yes

Indemnities - NoDuty of Care YesDuty of Care - Yes

Liability Cap - NoFitness for Purpose - Yes

Duty of Care - Yes Liability Cap - YesFitness for Purpose - Nop

Insurance RequirementsResources AvailableRi k All ti

pInsurance RequirementsStatus of EmployerRi k All tiRisk Allocation Risk Allocation

Risk Allocation

WHO

Hong Kong Jockey Club CapitaHong Kong Jockey Club

UK Atomic Energy Authority

Capita

DTZ Management Services

Derbyshire Police

Bournemouth University

Jones Lang LaSalle

Synergis Management Services

DLA Piper

Highland & Islands Enterprise

Gleeds

Knight FrankHighland & Islands Enterprise Knight Frank

Insurance Issues

Insurance requirements in a contract should reflect the allocation of risk – what risks are to be insured and who is responsible for insuring themand who is responsible for insuring them

Where risk is allocated to the Provider, it may still be preferable for the Owner to purchase and control certain of the Insurance

Insurance Issues

Professional Indemnityy

Third Party/Public or General Liability

Employee’s Compensation

Fidelity

Property All Risks

Professional Indemnity Insurance

WHAT IS COVERED ?

PII policies typically provide an indemnity in respect of legal liability arising from:

“Any negligent act error or omission”

or

“Any breach of professional duty”

Professional Indemnity Insurance (Exclusions)

THOSE LIABILITIES MORE PROPERLY COVERED BY OTHER INSURANCESBY OTHER INSURANCES

• PUBLIC LIABILITY INSURANCE

• EMPLOYEE’S COMPENSATION INSURANCE

• DIRECTOR’S & OFFICER’S RISK• DIRECTOR S & OFFICER S RISK

Professional Indemnity Insurance (Exclusions)

THOSE RISKS WHICH ARE TYPICALLY EXCLUDED BY MARKET PRACTICE:

• WAR RISKS

• TERRORISM

• IONISING RADIATIONS

ARRANGING INSURANCE (ON BEHALF OF A• ARRANGING INSURANCE (ON BEHALF OF A CLIENT)

Professional Indemnity Insurance (Exclusions)

THOSE RISKS WHICH IT IS INAPPROPRIATE FOR A PROFESSIONAL TO ASSUME;PROFESSIONAL TO ASSUME;

• FITNESS FOR PURPOSE

• LIABILITIES ASSUMED UNDER CONTRACT THAT GO BEYOND LIABILITY AT COMMON LAW

• LIQUIDATED DAMAGESLIQUIDATED DAMAGES

• FINES AND PENALTIES

Professional Indemnity Insurance (Claims Made)

CLAIMS MADE BASIS OF COVER

• IT IS THE POLICY IN FORCE AT THE TIME A CLAIM IS MADE WHICH WILL DEAL WITH THAT CLAIM, AS OPPOSED TO ANY POLICY WHICH MAY HAVE BEEN INOPPOSED TO ANY POLICY WHICH MAY HAVE BEEN IN FORCE AT THE TIME THE WORK GIVING RISE TO THE CLAIM WAS UNDERTAKEN

THIS IS A FUNDAMENTAL POINT IN UNDERSTANDING PROFESSIONAL INDEMNITY INSURANCEPROFESSIONAL INDEMNITY INSURANCE

Exposures

St Albans City Council –vs – ICL

Planned Maintenance

Legionella

Fidelity

THANK YOU

This presentation is provided solely for general information purposes and in our capacity as Insurance Brokers. The p p p yinformation contained herein does not purport to be a complete description of all terms, exclusions and conditions applicable to any insurance agreement Norconditions applicable to any insurance agreement. Nor should any comments be regarded as definitive legal advice which remains the prerogative of your legal advisors.

We will also be delighted to assist in any queries.g y q

The End

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