CLS launches insurance product for public contract award cancellations

CLS Risk Solution has launched its Public Procurement Insurance (PPI) for the broker market, having seen a 10-fold rise in enquiries following a recent legal ruling.

Until the Court of Appeal’s decision in Faraday Development Ltd v West Berkshire Council, no English court had ever awarded a declaration of ineffectiveness. Successful bidders and their advisers took some comfort from this and their ability to mitigate the risk of a declaration. The decision in Faraday has knocked that confidence by declaring the contract awarded by West Berkshire Council ineffective, said CLS.

The ruling has emphasised the risk of public contract award cancellations, presenting a new market opportunity for brokers. Since the Faraday ruling developers are warned that successful challenges to public contract awards are more likely and should be insured, said CLS.

Procurement law requires public bodies, such as government departments, schools, and NHS Trusts, to follow strict procedures when awarding qualifying contracts. In certain circumstances, a public body’s award of a contract may entitle a third party to challenge the award and seek a ‘declaration of ineffectiveness’, which effectively cancels the contract

CLS, an MGA for legal indemnity and transactional property risk solutions, claims that its PPI product is unique to the market. The product protects developers against the consequences and losses arising from a successful challenge to the award of a public contract.

Chris Gwynn, Lead Underwriter for Public Law Risks at CLS said: “The Faraday case has set a precedent for the award of declarations of ineffectiveness in England and Wales and created much uncertainty for all those parties involved in awards and carrying out of public contracts. This is prompting a cautious approach from contractors, funders, and their advisers, which is stalling contractual negotiation and jeopardising projects. All of this is resulting in a much greater demand for PPI insurance and presents a new market opportunity for brokers.”

Get all the latest re/insurance industry news with our daily newsletter -  sign up here.

​​ Tanker incident will drive up  war risk insurance rates for vessels in the Middle East: DWF

Gallagher acquires Swedish broker Proinova

Innovative escape of water claims process could save industry almost £100m a year

MS Amlin confirms exit from aviation insurance market

Feature:  10 ways insurers are using insurtech to drive new business