Landholder Indemnity Clauses
In the middle of 2020 a major farming insurance provider announced its intention to withdraw from the farming public liability insurance market. This was related to concerns around when farming public liability insurance policies will apply to protect regional landholders who have gas and other resource activities occurring on their property. To say the least, these concerns placed Landholders at risk of not being covered if damage or injury occurred when performing services not relating to their farming activities, such as undertaking plant operation for Resource Authority Holders on their land.
Since then, key stakeholders, including the Insurance Council of Australia, AgForce Queensland, Queensland Farmers Federation, Cotton Australia, and the Australian Petroleum Production & Exploration Association, have been meeting to overcome this issue and reach a resolution. On 3 March 2020, the GasFields Commission Queensland announced that it reached agreement on new indemnity clauses to provide further clarity and address this issue.
Landholder Indemnity Clauses
Six indemnity sub-clauses have been prepared to address the level of risk posed to landholders and Resource Authority Holders that increases when gas (and potentially other resource) activities are taking place on their properties. It is unclear if these clauses are intended to be used in conduct and compensation agreements ("CCA") between parties, or in insurance policies for either. These six clauses address:
1. Definitions – Activities and Infrastructure share the same definition as any CCA reached at the time. The terms Claim, Legal Liability, and Wilfully have also been defined for the purposes below.
2. Indemnity – The Resource Authority Holder will indemnify the Landholder for a range of costs and other damages arising out of its activities if it or its agents have caused or contributed to the damage.
3. Exceptions to Indemnity – The Resource Authority Holder won't be required to indemnify the Landholder above if the range of costs and other damages are addressed in the CCA, or if deliberately or wilfully caused or contributed to by the Landholder, or Landholder's "family, employees, agents, contractors, subcontractors, licensees or other invitees."
4. Release – Landholder's are released from any liability for damage or impairment to infrastructure of the Resource Authority Holder or plant and equipment of any contractor or subcontractor of the Resource Authority Holder.
5. Exceptions to Release – The Release extended to the Landholder under Item 4 does not apply to the extent that the damage to or impairment of the Infrastructure, plant or equipment is deliberately or Wilfully caused or contributed to by the Landholder, or Landholder's "family, employees, agents, contractors, subcontractors, licensees or other invitees.".
What this means for Landholders
For these clauses to have full effect, it will be necessary for all CCAs to fully particularise the activities to take place on a Landholder's property. Failing to do so will leave both parties vulnerable to insurance disputes and unnecessary legal fees and delays in payment to say the least.
There are no definitions of family, employees, agents, contractors, subcontractors, licensees, or, most concerning, "invitees." This extensive and vague list of Landholder representatives leaves open the possibility for almost all liability for damage and injury to be shifted to the Landholder.
The broad definition of "Wilfully" also has this effect. On the one hand, were it not for the Resource Authority Holder and its Activities, the event giving rise to the damage or injury would not have arisen. On the other hand, in our experience most services are performed by Landholders through their ordinary business structures which are covered by public liability insurance. For a Landholder to avoid the risk of any claims being unfairly accepted against their farming public liability insurance, it will be necessary for there to be no performance of services by Landholders or their associates.
If liability for damage or for injury is shifted to the Landholder and the Landholder's farming public liability insurance does not apply, then it is the Landholder who will be personally responsible for the costs of those losses. Landholders will need to be mindful of the farming public liability insurance and ensure it is adequately updated for the possible claims for damages or injuries that may arise. It may also become necessary to involve a Landholder's insurance company in the preparation of CCAs.
The Landholder Indemnity Clauses announced provide much needed clarity for Landholders and Resource Authority Holders about who is responsible for what damage or injury caused on a Landholder's property. Once put into practice, we anticipate these clauses to develop further.
Should Landholders wish to avoid the risk arising from gas or other resource activities occurring on their property, then it will be necessary to refuse performing or being involved any services for a Resource Activity Authority at all, or at least after seeking legal advice and contacting their insurance provider or broker.