It is not uncommon for a party to seek to limit their liability in a contract by placing a monetary limit on the liability that party would otherwise have at common law. This is often referred to as ‘capping liability’ or ‘capping indemnity’. Sometimes the ‘cap’ may align with the contract value.
QGIF does not consider that it is in the best interests of an agency to agree to such requests because capping liability can have the effect of transferring to the agency, risk that is not inherently its own.
Should there be compelling reasons for the insured agency to limit or agree to limit the other party’s liability, there should be no capping on personal injury and property damage and we suggest that any capping on other exposures be no less than the limit of liability stipulated under the ‘insurance clause’. Set out below are exceptions to limitation of liability and exclusion of Consequential Loss:
The cap on liability in clause xxx and the exclusion of liability for Consequential Loss in clause xxx, does not apply to any liability arising out of or in connection with:
a) loss of or damage to third party property
b) death or injury to any person
c) infringement or alleged infringement of any intellectual property rights or moral rights
d) fraud or wilful misconduct; or
e) a risk, event or circumstance covered under a policy of insurance that the Contractor is required to effect and maintain under this letter agreement, in which case the Contractor’s liability to the Principal in connection with such risk, event or circumstance is limited to the amount recoverable under such policy of insurance (plus the amount of any deductible) or, if greater, the amount that would have been recoverable under such policy of insurance if the Contractor had complied with its obligations under this Contract to effect and maintain such policy of insurance and its obligations under such policy of insurance.
A risk assessment may assist in determining the appropriateness of the proposed cap.
You should exercise caution before agreeing to such a provision and seek legal advice on the risks and implications for your Agency.