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Who pays liability costs & damages if a Parish Council has its liability insurance revoked?

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If a Parish Council were sued for nuisance, negligence, structural damage, damages and costs et al by a parishioner, and the PC's liability insurers and their underwriters, having investigated the matter, then revoked the insurance cover, having concluded that the PC had invalidated the insurance contract by their own negligence.  Who would be held liable for the substantial settlement or judgement if it greatly exceeded the disposable funds within the PC's precept?

If the PC had grossly insufficient funds to either settle out of court or pay a court judgement because their liability insurance claim had been denied, who would pay?

Would the debt be covered by District or County Council? Is there a protocol or precedent for this eventuality?

In the event of having had their claim for liability insurance denied, could a Parish Council become bankrupt (or similar) if they were unable to settle out of court or pay a substantial judgement against them?

Could individual councillors be held liable?
by (120 points)
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1 Answer

0 votes
This sounds a complex business that is hard to understand from a brief description.  It also appears to be the kind of issue where parties who are directly involved should seek legal advice directly from specialist lawyers who are competent to deal with the various issues raised.  The following is an amateur opinion, and no substitute for legal advice taken from a competent professional who is assuming a duty of care to the client.

General points that go some way to answering the questions raised are:

A council exists by statute and cannot become bankrupt.  It has a power of taxation (in the case of local councils through the process of precepting) and can thus always raise more money.   A parish council can also borrow and will normally be able to do so on relatively good terms similar to those on which govenment borrows.

A council can thus settle out of court based on its future access to taxes or borrowing.  And anyone having a liability to pay a settlement is entitled to ask the court to spread payments according to their ability to pay.

If a parish council can be shown to have caused damage and to be legally responsible, then the parish council will have to bear any settlement.

I am not aware that district or county councils have any responsibility to bail out local councils in trouble.

Parish councillors are normally liable only if they have not acted in good faith.

Without further details, the insurers' position is puzzling, since public liability insurance normally covers a council against claims based on the council's negligence.  Although the problem could arise if the negligence relates to the disclosure of the risks to be covered, which is of the essence of an insurance contract.
by (31.2k points)

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