CONTRACTUAL RISK TRANSFER RECOMMENDATIONS
The following checklist suggests some approaches for minimizing friction between contracting parties (or the possibility of unknown breaches of contract requirements) while still securing realistic protection for risk transferors.
• Update your insurance requirements to reflect modern insurance terminology. If your contract still requires “comprehensive” general liability insurance with a broad form property damage endorsement, it was written in the dark ages.
• Construct your additional insured requirement to deal with the other insurance issue in a manner that works with the standard industry approach instead of requiring special language that achieves nothing more but is very difficult to obtain.
• Don’t require a waiver of subrogation endorsement on the transferee’s general liability policy. Include a waiver of subrogation in the contract if you wish (though it is probably unnecessary if you are an additional insured), but don’t require an endorsement to the policy.
• Evaluate whether you really need a workers compensation waiver of subrogation. If you decide to require one, be prepared for push back from transferees who can’t get their insurer to comply (or to be asked to help pay an additional premium for it).
• Don’t require that additional insured status apply to completed operations coverage. This is a thing of the past, and you should be able to rely on other ways to transfer the risk (i.e., the indemnity clause).
• Prequalify those with whom you do business to make sure they can be relied on to perform all their contractual duties, including buying the insurance they promise to obtain, so you don’t feel compelled to seek a modified certificate of insurance which often only provides a false sense of security.
• Accept the standard insurance certificate without modification and simply require a copy of the additional insured endorsement adding you to the transferee’s policy. If you must have it modified, require only that “endeavor to” be crossed out.
• Don’t try to get a contractual commitment for a longer notice of cancellation than required by the state’s law in the event of cancellation for nonpayment of premium.
