H. Significance of procuring third party risks insurance
In 1994, the canopy of a seafood restaurant situated at Albert House in Aberdeen collapsed. One passer-by was killed and 13 others were injured in the incident.
The High Court held that the OC, property management company, restaurant, licencee of the restaurant, owner of the unit at which the restaurant was situated and contractor that had built the canopy were liable for compensation to the victims, which amounted to more than HK$30 million.
Since the OC of Albert House did not have third party risks insurance, it was unable to pay the compensation. Eventually, the OC had to be wound up.
Pursuant to the Building Management Ordinance (Cap. 344 of the Laws of Hong Kong), each of the individual owners was liable and had to pay a portion of the compensation for his/her share of the liability.
The message from this case is that compensation must be paid if the court rules that the victim must be compensated. If the OC does not have third party risks insurance, it has to make full compensation. If it does not have sufficient funds to pay compensation and has to be wound up, each individual owner becomes personally liable for the compensation. If individual owners are unable to pay compensation, they may be forced into bankruptcy.
Procuring third party risks insurance protects the owners and any potential third party victims, thus reducing the financial risks faced by the owners should an accident occur.