Contracts have always been a very important part of the insurance industry. An insurance policy is a contract that you (business or individual) enter into with an insurance carrier. In business, insurance requirements are getting tougher and tougher. This is especially true in the Construction Industry, where contract language alone can be challenging in and of itself. I would like to point out a few of some of these terms that you might encounter.
- Indemnification Agreements – These contracts are stipulating what parties you are indemnifying. Typically, these agreements flow downhill (meaning the General Contractor pushes as much liability as possible down to the subcontractors). This can lead to subcontractors taking on more liability than they actually generate out of their own activities.
- Waiver of Subrogation – This is a term that is widely misunderstood by insureds. Simply put, when you sign a contract that has a waiver of subrogation clause contained in it, you are signing the rights of YOUR insurance carrier away. (They just love it when you do that). In practical terms, this means that your insurance carrier cannot recoup the money it paid out on a loss even if you were not responsible for causing the loss.
- Completed Operations Coverage – Some of these contracts are stipulating that your insurance program’s completed operations coverage extend upwards of 3-5 years after your portion or the project has been completed. You could sign this contract and now your insurance carrier is obligated to provide this coverage for the specified period of time in the contract. They may or may not be an additional premium associated with this.
- Primary and Non-Contributory- This language simply means that your insurance program will be the primary insurance (pays first) and your carrier cannot seek any sort of payment from another’s policy that also states it is primary.
- Notice of Cancelation- Often times these contracts dictate how much notice has to be given if your insurance policy/policies are set to cancel for any reason. The problem arises when you sign a contract that stipulates a certain amount of time to be given if a cancelation is going to occur, but the state’s regulations are different.
This contractual language is becoming more common these days, and it paramount that you have a handle on what all of this means before it comes back to bite you. You don’t want to be saying “Wait….what did I sign?” If you would like to discuss your current contracts or any of your insurance coverages, you can reach out to me at firstname.lastname@example.org.