How do you review the insurance clause in contracts?
As the examples below illustrate, insurance clauses are typically easy to identify, since they are often found in their own section of an agreement with a heading that includes the word “insurance”. Yet, even when an agreement has a clearly marked insurance section, it may not be the only insurance clause. Example 13 below, for instance, has two insurance clauses, one of which is in a section addressing owned/leased real estate. In this case, the second insurance clause is clearly labelled “Title Insurance”, which should stand out to a reviewer. In other cases, however, it may not be so obvious.
After locating all the insurance language in each agreement, some important things to focus on when reviewing these provisions are:
- The identity of the insuring party (or parties). The insurance clause will require at least one party (and sometimes all parties) to have specific insurance in place for a given period, which may be the term of the agreement or a longer period. Where the clause specifies more than one type of insurance, be sure to confirm which party is the insuring party for each type. The insuring party is typically, though not always, also responsible for all associated costs. Some agreements will specify that this includes not only the premiums but also other costs such as deductibles and self-insured retentions (see example 5 below). Example 13 below is interesting in that Merchant (the insuring party) appears to be responsible for paying the premiums on the insurance described in sections 11.1 to 11.3, but note that Agent (the non-insuring party) pays any deductibles, retentions, etc. in the event of a claim.
- Type(s) of insurance. As mentioned above, a number of factors will determine the types of insurance required for a given contract. Some common types of insurance required by an insurance clause include: general liability, professional liability, automotive liability, errors and omissions, business interruption, employers’ liability, and workers’ compensation. Where specified, note whether the clause requires a particular policy to be issued on an “occurrence” or “claims made” basis, as this has implications for both the scope and cost of coverage. In essence, an “occurrence” basis policy provides coverage for loss or injury that occurred during the policy term, even if the associated claim is filed long after the policy has expired; whereas, a “claims made” policy provides coverage for loss or injury that occurred during the policy term (or, if applicable, on or after the retroactive date) and for which a claim is made within the term (or, if applicable, before the end of the extended reporting period). Because of the long-term coverage it provides, “occurrence” basis insurance tends to cost more than “claims made” basis insurance. Note, as well, whether any non-insuring party has the right to increase the coverage limits or add to the types of insurance that an insuring party must maintain. Section 10.01(f) in example 6 below, for instance, gives Landlord (the non-insuring party) broad discretion to require Tenant (the insuring party) to increase coverage limits and obtain additional insurance, which may increase Tenant’s insurance costs significantly.
- Amount of coverage. Monetary amounts included in the insurance clause in connection with one or more types of insurance typically establish the minimum level of coverage required. Be sure, however, to pay attention to whether these amounts refer to per person limits, per occurrence limits, aggregate limits, or any combination thereof. In particular, for per person and per occurrence limits, note whether the clause stipulates combined single limit or split limit coverage. Simply put, combined single limit coverage specifies a single dollar amount that applies to any combination of claims for loss or injury covered by the policy; whereas, split limit coverage specifies separate limits for each such category of insured loss or injury. Because of the more flexible coverage a combined single limit policy affords, the cost of insurance tends to be higher.
- Additional insured or loss payee. Insurance clauses may require that the non-insuring party be named as either an additional insured or a loss payee under one or more of the insurance policies described in the clause. Being added to a policy as an additional insured or a loss payee entitles the non-insuring party to receive at least some degree of coverage under the policy. Yet, despite this similarity, they are not the same thing. In basic terms, an additional insured shares in the liability coverage of a policy, which helps protect it from liability risk (e.g., lawsuits) resulting from its relationship with the named insured (i.e., the insuring party); whereas, a loss payee typically has an insurable interest in property covered by a policy and is entitled to payment of insurance proceeds in the event this property is damaged. Some insurance clauses, like example 7 below, may stipulate that the non-insuring party be added as both additional insured and loss payee. In the case of example 7 below, the dual status is likely conferred on the lessor (or “We”/“Us” in that agreement) because it has both liability and property loss exposure in connection with leasing the Equipment.
- Requirement to provide a certificate or other evidence of insurance. Where an insurance clause states that the insuring party will provide a certificate of insurance, the non-insuring party should consider whether the certificate provides adequate assurance of ongoing coverage. Certificates of insurance are not insurance contracts, meaning they typically do not confer legal rights on the certificate holder. So, for example, even in cases where an insurance clause requires the certificate to specify that the non-insuring party shall be notified within a certain period of time prior to any cancellation, non-renewal, material modification etc. of the policy (see, for instance, examples 2 and 3 below), the non-insuring party may not, in fact, have any legal right to receive such notice, and the insurance company that issued the policy may have no obligation to provide it. More favorably drafted insurance clauses will state that the non-insuring party has the right to obtain a copy of each policy instead of (or in addition to) a certificate. Example 6 below, for instance, specifies that Tenant will provide a copy of any policy that is initially evidenced only by a certificate within 30 days of the Term’s commencement. And even if the insurance clause does not entitle the non-insuring party to a copy of the policy, the non-insuring party may want to consider requesting one from the insuring party anyway.
- Minimum Ratings. Where an insurance clause requires insurance to be obtained from an insurance company that satisfies a minimum ratings requirement, the clause almost invariably specifies a rating from A.M Best. A.M Best’s ratings generally consist of (i) a letter grade between A++ and D, indicating the financial strength of the insurance company, which is based on A.M Best’s view of the overall financial position of the company and its ability to meet its ongoing insurance obligations; and (ii) a roman numeral from I to XV, indicating the financial size of the insurance company, as measured by the company’s adjusted policyholder surplus (which is essentially a measure of its net worth). For example, “A- VII” indicates an insurer with an excellent (A-) financial strength rating and an approximate net worth of US$50 - 100 million. Having a minimum rating requirement expressed as a specific A.M. Best rating gives the insuring party clear guidance on the quality and size of acceptable insurers for the purposes of the clause. Some agreements, however, are not so clear; and without additional guidance, the insuring party may be uncertain about which insurers will be acceptable. Example 3 below, for instance, illustrates this issue. It essentially states that the distributor (“you” in that agreement and the insuring party) must maintain applicable insurance with “a financially sound insurance company” acceptable to the contracting government agency (“us” in that agreement and the non-insuring party). The wording of that clause gives the government agency broad discretion to decide what insurance companies are acceptable, thereby introducing an element of ambiguity that the distributor would need to clarify separately.
As with the review of any contractual provision, it’s also important to be aware of other provisions that may affect the interpretation of insurance clauses. Be sure to consider, for example, any interaction between the indemnification clause and the insurance clause. Example 4 below, for instance, provides that any insurance procured pursuant to that clause shall in no way limit each party’s indemnification obligations under the agreement. In other words, the coverage limits on the insurance in that case will not serve to limit each party’s liability under the indemnification clause. Similarly, any caps on liability established by the limitation of liability clause should be compared against the amounts of coverage stated in the insurance clause to determine whether any significant difference between these amounts is cause for concern. For insurance clauses that require one party to provide notice to the other, the notice clause will set out the rules for giving legally binding notice. The term clause (and also the renewal clause) provides important information about the term of the agreement, which can help clarify how long the policies prescribed by the insurance clause must be maintained. And last but not least, the policies themselves (including any endorsements) and any certificates or other evidence of insurance help confirm whether the insurance obtained by the insuring party conforms with the requirements of the insurance clause.
Software that uses AI to identify and extract insurance clauses (as well as other terms that may affect their interpretation) can accelerate the work of finding these provisions and enable a more comprehensive review than can otherwise be done manually.
Examples of the Insurance Clause
Below are some examples of insurance clauses from different kinds of agreements. While these examples do not necessarily cover the full range of insurance clauses one may encounter, they are meant to illustrate the degree to which these provisions can vary from contract to contract. Where an example includes broader contextual language, the insurance clause is highlighted in bold.
Example 1: From a Supply Agreement
1.11 Risk of Loss and Insurance. Cabot is and shall be the sole owner of Tuscola Unit C and any Tuscola Unit C Capacity Expansions. Risk of damage or loss for whatever reason for Tuscola Unit C and any Initial Capital Asset, Replacement Capital Asset or Additional Capital Asset (as each are defined in Schedule 1, collectively “Capital Assets”) shall be borne by Cabot. During the Term of this Agreement, Cabot shall maintain the following levels of the following types of insurance:
A. Workers’ Compensation and Employers’ Liability
1. Coverage “A” - Statutory State of Illinois
2. Coverage “B” - Employers’ Liability
Limit $500,000 each person, $1,000,000 each accident
B. Comprehensive General Liability - One or more policies with aggregate limits of liability of $2,000,000 Combined Single Limit Per Occurrence.
Example 2: From a Surface Lease
9.2 General Liability Insurance. In addition to and not in limitation of the obligations described in Section 9.1 hereof, Lessee covenants and agrees to maintain and keep in full force and effect, throughout the term of this lease, general liability and property damage insurance, on an occurrence basis, with coverage of not less than Two Million Dollars ($2,000,000) for injuries or damages to any one person, Two Million Dollars ($2,000,000) for any one occurrence, and Two Million Dollars ($2,000,000) property damage, in which policy of insurance both Lessee and Lessor shall be named an insured. Any such policy or policies shall specifically provide that Lessor may be a permissible claimant for any damage done to its properties.
9.2-2 Commercial Automobile Liability Insurance. In addition to and not in limitation of the obligations described in Section 9.1 hereof, Lessee covenants and agrees to maintain and keep in full force and effect, throughout the term of this Lease, automobile insurance and non-owned automobile insurance, on an occurrence basis, in a good and reliable commercial insurance company or companies authorized to do business in the State of West Virginia with coverage of not less than Two Million Dollars ($2,000,000.00) for injuries or damages to any one person, Two Million Dollars ($2,000,000.00) for any one occurrence, and Two Million Dollars ($2,000,000.00) property damage, in which policy of insurance both Lessee and Lessor shall be named an insured. Any such policy or policies shall specifically provide that Lessor may be a permissible claimant for any damage done to its properties.
9.3 Workers’ Compensation Insurance. Lessee, its sublessees, assigns and contractors shall, throughout the term of this lease, be and remain a subscriber to the West Virginia Workers’ Compensation Fund of which Lessee is a member as a self-insured entity.
9.4 Intentionally left blank.
9.5 Form of Insurance Certificates. All insurance required under the provision of this Article shall contain a provision requiring thirty (30) days’ advance notice to Lessor of any proposed cancellation or any material change in coverage. Certificates in respect to all such insurance shall be delivered to Lessor prior to commencement of any operations on the demised premises.
Example 3: From a Distribution Agreement
- INSURANCE. Your company agrees to maintain, at its expense, at all times during the term of this agreement commercial general liability insurance coverage, including products and contractual liability insurance with limited form vendor’s coverage, with limits of at least $5,000,000 combined single limit, and will provide us, prior to the commencement of this agreement, with a certificate of insurance from a financially sound insurance company acceptable to us evidencing such coverage, which names us as an additional insured under your company’s policy or policies and provides for at least sixty (60) days prior written notice to us of any cancellation or material modification of such policy or policies.
Example 4: From a Supply Agreement
7.3 Insurance. Each Party shall procure and maintain insurance, including product liability insurance, adequate to cover its obligations hereunder and that are consistent with normal business practices of prudent companies similarly situated at all times during which any Product is being clinically tested in human subjects or commercially distributed or sold. It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 7. Each Party shall provide the other with written evidence of such insurance upon request. Each Party shall provide the other with written notice at least thirty (30) days prior to the cancellation, non-renewal or material change in such insurance or self-insurance which materially adversely affects the rights of the other Party hereunder.
Example 5: From a Master Service Agreement
INSURANCE AND RISK OF LOSS
21.1. Provider Insurance
(a) Policies and Coverage Amounts
During the Term of the Agreement and for a period of at least one year thereafter, Provider and each Provider Agent that provides or performs any of the Services shall maintain and keep in force, at its own expense and without limiting its indemnity obligations as set forth in Section 20.1 of the Agreement, the insurance coverages and limits set forth in the “Insurance Requirements” Exhibit, in accordance with the Agreement, in forms and with insurance companies qualified to do business in the states where the Services are performed.
Provider shall deliver, and shall cause Provider Agents performing any portion of the Services under the Agreement to deliver, certificates of insurance verifying the required coverage, in a form reasonably acceptable to Customer, prior to the Commencement Date. Following the Commencement Date, Provider shall provide, and shall cause each of Provider Agents performing any portion of the Services under the Agreement to provide, certificates of insurance verifying the required coverage upon Customer’s written request. Provider agrees to provide, and shall cause each of Provider Agents performing any portion of the Services under the Agreement to provide, in a form reasonably acceptable to Customer, renewals of such certificates of insurance upon receipt of such renewals. Neither Customer’s failure to request evidence of insurance coverage required hereunder nor receipt or acceptance by Customer of any certificate of insurance that does not satisfy the coverage criteria set forth in this Section 21, shall operate as a waiver of Provider or Provider Agents’ obligations hereunder.
(c) General Requirements
With the exception of any captive insurance companies which are Affiliates of Provider, the required insurance shall be provided by insurance companies that have a minimum A.M. Best Rating of A- VII. Provider and any Provider Agents performing any portion of the Services under the Agreement shall include Customer as an additional insured on all policies described in the “Insurance Requirements” Exhibit (other than the workers’ compensation, property, professional liability, cyber liability, errors and omissions, and crime insurance policies). All liability insurance policies shall be written on an “occurrence” policy form, except as expressly provided in the “Insurance Requirements” Exhibit. Customer Group shall be named as loss payee as its interest may appear on the property insurance policy of Provider. Provider shall be responsible for payment of any and all deductibles, self-insured retentions, and self-insurance carried by Provider under its insurance program(s). The coverage afforded under any insurance policy obtained by Provider pursuant to the Agreement shall be primary with respect to Provider’s acts or omissions and not be in excess of, or contributing with, any insurance maintained by Customer Group and its assigns. Provider and Provider Agents shall not perform under the Agreement without the prerequisite insurance. Unless previously agreed to in writing by Customer, Provider and Provider Agents shall comply with the insurance requirements herein and Provider agrees to be solely responsible for any deficiencies in the coverage, policy limits and endorsements of Provider Agents performing any portion of the Services under the Agreement. If Provider or Provider Agents fail to comply with any of the insurance requirements herein, upon Notice to Provider by Customer and a ten day cure period, Customer shall have the right, but not the obligation, to provide or maintain any such insurance, and to deduct the cost thereof from any amounts due and payable to Provider under the Agreement, or, in the event there are no such amounts due and payable, Provider shall reimburse Customer for such costs on demand….
This is Exhibit 12, insurance requirements, to that certain Master Services Agreement, dated as of November 1, 2015 (the “Master Agreement”), between Sabre GLBL Inc. (“Customer”) and HP Enterprise Services, LLC (“Provider”).
In accordance with Section 21.1 of the Master Agreement, this Exhibit sets forth the insurance coverages and limit requirements for Provider and Provider Agents.
Capitalized terms used in this Exhibit but not defined herein shall have the meaning ascribed to such terms in the Master Agreement and its Exhibits, including the “Definitions” Exhibit to the Master Agreement, and its Schedules (including the “Definitions” Schedule), Attachments, and Appendices. Unless otherwise specified, references to “Section” refer to the applicable Section of this Exhibit.
In the event of a conflict between the provisions of this Service Agreement and the Master Agreement, the provisions of Section 2.3 of the Master Agreement shall control such conflict. As set forth in Section 2.3 of the Master Agreement, in the event of a conflict between the terms of this Exhibit and the terms of the Master Agreement, the terms of the Master Agreement shall prevail over the terms of this Exhibit.
3. INSURANCE COVERAGES AND LIMITS
During the Term of the Agreement and for a period of at least one year thereafter, Provider and each Provider Agent that provides or performs any of the Services shall maintain and keep in force, at its own expense and without limiting its indemnity obligations as set forth in Section 20 of the Master Agreement, the insurance coverages and limits set forth below, in accordance with the provisions of Section 21.1 of the Master Agreement:
(a) Workers’ compensation insurance, with statutory limits as required by the various Laws and regulations applicable to the employees of Provider and any Provider Agent that provides or performs any of the Services;
(b) Employer’s liability insurance, for employee bodily injuries and deaths, with a limit of [* * *] each accident. Umbrella or excess liability insurance may be used to satisfy the limit requirement in this Section 3(b). Such umbrella or excess liability policy shall follow the form of the primary coverage set forth herein, exceed the underlying policy without gaps in limits and provide coverage as broad as the underlying insurance coverage;
(c) Commercial general liability insurance, covering claims for bodily injury, death and property damage, including premises and operations, independent contractors, products, services and completed operations (as applicable to the Services), personal injury, contractual and property damage liability coverages, with limits as follows: [* * ] each occurrence for bodily injury, death and property damage and [ * *] in the aggregate. Umbrella or excess liability insurance may be used to satisfy the limit requirement in this Section 3(c). Such umbrella or excess liability policy shall follow the form of the primary coverage set forth herein, exceed the underlying policy without gaps in limits and provide coverage as broad as the underlying insurance coverage;
(d) Comprehensive automobile liability insurance, covering owned, non-owned and hired vehicles, with limits as follows: [* * *] combined single limit for bodily injury, death and property damage per occurrence. Umbrella or excess liability insurance may be used to satisfy the limit requirements in this Section 3(d). Such umbrella or excess liability policy shall follow the form of the primary coverage set forth herein, exceed the underlying policy without gaps in limits and provide coverage as broad as the underlying insurance coverage;
(e) All-risk property insurance, on a replacement cost basis, covering the real and personal property of Provider which Provider is obligated to insure by the Agreement; such real and personal property may include buildings, equipment, furniture, fixtures and supply inventory;
(f) Professional liability and technology errors and omissions insurance (including cyber-security and privacy liability coverage) (collectively, “E&O Coverage”) covering liability for al loss or damages arising out of the Services provided by Provider or any Provider Agent under the Agreement, with a limit of [* * *] per claim and annual aggregate. Al coverage under this Section 3(f) shall comply with the following requirements:
The retroactive coverage date shall be no later than the retroactive date in effect for Provider’s current professional liability policy or technology errors and omissions policy (or any other policy providing cyber-security and/or privacy liability coverage). The policy shall be a “claims made” policy. Provider shall maintain an extended reporting period or procure “tail” coverage providing that claims first made and reported to the carrier within two years after termination of the Agreement will be deemed to have been made during the policy period.
The E&O Coverage shall be written as primary with respect to any insurance issued directly to or maintained by Customer or Customer Group. The E&O Coverage must not include any exclusion for contractual liability arising under this Agreement or other agreements entered into by Customer or Customer Group, or otherwise exclude cyber-security or privacy liability or other risks arising out of Provider’s or any Provider Agent’s Services under the Agreement; and
(g) Comprehensive crime insurance covering dishonest acts of employees, agents, contractors and subcontractors; such insurance to be written for limits of [* * *] and include Customer as a joint loss payee.
Example 6: From a Commercial Lease
ARTICLE 10 - INSURANCE
10.01. Tenant shall obtain and keep in full force and effect at all times during the Term of this Lease, at its own cost and expense: (a) “All Risk” property insurance against fire, theft, vandalism, malicious mischief, sprinkler leakage and such additional perils (including flood and earthquake) as are now, or hereafter may be, included in a standard extended coverage endorsement from time to time in general use in the State of New Jersey upon property of every description and kind owned by Tenant and or under Tenant’s care, custody or control located in the Building or for which Tenant is legally liable or installed by or on behalf of Tenant, including by way of example and not by way of limitation, furniture, fixtures, installation and any other personal property in an amount equal to the full replacement costs thereof; (b) Commercial General Liability Insurance Coverage to include personal injury, bodily injury, broad form property damage, operations hazard, owner’s protective coverage, blanket contractual liability, products and completed operations liability naming Landlord, and Landlord’s mortgagee or trust deed holder and ground landlord (if any) as additional named insureds in an amount per occurrence of not less than One Million and 00/100 ($1,000,000) Dollars combined single limit per occurrence and Two Million and 00/100 ($2,000,000) Dollars general aggregate for bodily injury or death and property damage occurring in, upon, adjacent, or connected with the Demised Premises and any part thereof on a per location basis, as well as at least One Million and 00/100 ($1,000,000) Dollars of coverage for property insurance. Tenant shall name such other insureds associated with the Building as Landlord reasonably requests. Tenant shall pay all premiums and charges therefor and upon failure to do so Landlord may, but shall not be obligated to, make payments, and in such latter event the Tenant agrees to pay the amount thereof to Landlord on demand and said sum shall be deemed to be additional rent, and in each instance collectible on the first day of any month following the date of notice to Tenant in the same manner as though it were rent originally reserved hereunder, together with interest thereon at the rate of three points in excess of Prime Rate. Copies of the original insurance policies or appropriate certificates shall be deposited with Landlord together with any renewals, replacements or endorsements at all times to the end that said insurance shall be in full force and effect for the benefit of the Landlord during the Term of this Lease; (c) business interruption insurance in such amounts as will reimburse Tenant for direct or indirect loss of earnings, for a period of not less than twelve (12) months, attributable to all perils, commonly insured against by prudent tenants or assumed by Tenant pursuant to this Lease or attributable to prevention or denial of access to the demised Premises or the Building as a result of such perils; (d) Worker’s Compensation insurance in form and amount as required by law; (e) excess or “umbrella” liability insurance in an amount of not less than Three Million and 00/100 ($3,000,000) Dollars; and (f) any other form or forms of insurance or any increase in the limits of any of the aforesaid enumerated coverages or other forms of insurance as Landlord or the mortgagee of Landlord may reasonably require from time to time if in the reasonable opinion of Landlord or said mortgagees or said coverage and/or limits become inadequate or less than that commonly maintained by prudent tenants in similar buildings in the area by tenants making similar uses.
10.02. All insurance policies required pursuant to this Article shall be taken out with insurers rated A-XII by A.M. Best Company, who are licensed to do business in the State of New Jersey and shall be in form satisfactory from time to time to Landlord. A policy or certificate evidencing such insurance together with a paid bill shall be delivered to Landlord not less than fifteen (15) days prior to the commencement of the Term hereof. Such insurance policy or certificates will unequivocally provide an undertaking by the insurers to notify Landlord and the mortgages of Landlord in writing not less than thirty (30) days prior to any material change, reduction in coverage, cancellation or other termination thereof (except that any cancellation for non-payment shall require only ten (10) days prior written notice). Should a certificate of insurance initially be provided, a policy shall be furnished by Tenant within thirty (30) days of the Term’s commencement. The aforesaid insurance shall be written with no reasonable and customary deductibles.
10.03. Landlord and Tenant agree to include in each of its property insurance policies a waiver of the insurer’s right of subrogation against the other party.
10.04. Each party hereby releases the other party with respect to any claim (including a claim for negligence) which it might otherwise have against the other party for loss, damage, or destruction with respect to its property (including rental value or business interruption) occurring during the term of this Lease to the extent to which it is insured under a policy or policies containing a waiver of subrogation or naming the other party as an additional insured, as provided in this Article.
10.05. Landlord covenants and agrees that throughout the Term it will insure the Building (excluding any property with respect to which Landlord is obligated to insure pursuant to Section 10.01, above) against damage by fire and standard extended coverage perils, “all-risk” or fire and extended coverage insurance and public liability insurance in such reasonable amounts with such reasonable deductibles as required by any mortgagee or ground Landlord (if any), or if none, as would be carried by a prudent owner of a similar building in the area. In addition, Landlord shall maintain and keep in force and effect during the Term, rental income insurance insuring Landlord against abatement or loss of Fixed Base Rent and Additional Rent, in case of fire or other casualty similarly insured against, in an amount at least equal to one year’s Fixed Base Rent for the Building. Landlord may, but shall not be obligated to, take out and carry any other forms of insurance as it or the mortgagee or ground lessor (if any) of Landlord may require or reasonably determine available. All insurance carried by Landlord on the Building or Land shall be included as an Operating Expense pursuant to Article 5.
Example 7: From an Equipment Lease
- INSURANCE. You will keep the Equipment fully insured against loss, for not less than the replacement cost of the Equipment, and will obtain a general public liability insurance policy, covering the Equipment and its use. You will name Us as an additional named insured and any loss payee on any such policy and will provide Us with certificates or other evidence of insurance acceptable to Us, before this Lease term begins. In the event You fail to procure the insurance required, We may obtain such insurance and charge you an insurance fee. Any insurance proceeds received with respect to the Equipment will be applied, at Our option, (i) to repair, restore or replace the Equipment, or (ii) to pay to Us the remaining balance of the Lease plus Our estimated residual value, both discounted at 6% per year, whereupon this Lease will terminate.
Example 8: From a License and Distribution Agreement
A. Insurance. Company shall arrange insurance policies in respect of the goods and services of each hereunder affording coverages commonly referred to by the insurance industry as: (a) commercial general liability, including products/completed operations, contractual liability, personal and advertising liability and premises/operations liability; (b) automobile liability, including coverage for owned, non-owned, hired or borrowed vehicles; and (c) employer’s liability and workers compensation insurance, or qualified self-insurance, for all employees as required by law. Company’s commercial general liability and auto liability insurance policies shall include Licensor as an additional insured, and shall be primary and non-contributing with any insurance maintained by Licensor as respects claims resulting from Company’s negligence. All said insurance shall be obtained and maintained in full force and in effect during the entire term of this Agreement, and shall be written on an occurrence basis with a per occurrence limit of not less than $2,000,000 and an annual aggregate limit of not less than $5,000,000. An insurance certificate of all of the foregoing, including all of the required coverages and endorsements, shall be provided to Licensor prior to the commencement of services under this Agreement. Each policy shall require the insurer to give Licensor not less than thirty (30) days prior written notice of any termination or material modification of coverage. To the extent that the parties both maintain insurance, they waive their insurers’ right of subrogation for damage which may be attributable to the other party’s negligence. To the extent of available insurance, any indemnification otherwise payable under this Agreement shall be subject to this mutual waiver of subrogation rights.
Example 9: From a Product Manufacture and Supply Agreement
Insurance. During the Term and for three (3) years thereafter, each Party shall maintain insurance with an insurance company that has an A.M. Best rating of A- or better, and that is reasonable and prudent in light of prevailing market practices, and other relevant factors, but in no event shall such insurance coverage include less than General Commercial Liability Insurance and umbrella with combined limits of not less than $3M/occurrence. Company shall be named as an additional insured under Supplier’s policies. Upon a Party’s request, the other Party shall provide to such Party a certificate of insurance showing that such insurance is in place. Neither Party shall cancel or amend its insurance policies such that such policy will be inconsistent with the requirements set forth in the first sentence of this Section 10.5 without the other Party’s prior written consent. In no event shall this Section 10.5 in any way limit or be considered a waiver of either Party’s liability with respect to its indemnification or other obligations under this Agreement.
Example 10: From a Master Services Agreement
Vendor covenants that as of the Effective Date it shall have, and agrees that during the Term it shall maintain in force, at least the following insurance coverages:
(a) Employer’s Liability Insurance (Coverage B) and Worker’s Compensation Insurance (Coverage A), including coverage for occupational injury, illness and disease, and other similar social insurance in accordance with the laws of the country, state or territory exercising jurisdiction over the employee with Statutory Limits (Coverage A) and minimum limits (Coverage B) per employee and per event of $2,000,000 or the minimum limit required by law, whichever limit is greater.
(b) Comprehensive General Liability Insurance, including Products, Completed Operations, Premises Operations, Bodily Injury, Personal and Advertising Injury, on an occurrence basis, with a minimum combined single limit per occurrence of $3,000,000 and a minimum combined single aggregate limit of $5,000,000. This coverage shall include Customer and its Affiliates as Additional Insureds.
(c) Property Insurance and Business Income coverage, for all risks of physical loss of or damage to buildings, tangible business personal property or other tangible property that is owned or leased and supplied by Vendor pursuant to this Agreement or otherwise. Such insurance shall have a minimum limit adequate to cover risks on a replacement costs basis.
(d) Automotive Liability Insurance covering use of all owned, non-owned and hired automobiles for bodily injury, property damage liability with a minimum combined single limit per accident of $3,000,000 or the minimum limit required by law, whichever limit is greater. This coverage shall include Customer and its Affiliates as Additional Insureds.
(e) Commercial Crime Insurance, including blanket coverage for Employee Dishonesty for loss or damage to tangible property arising out of or in connection with any fraudulent or dishonest acts committed by the employees of Vendor, acting alone or in collusion with others, including the property and funds of others in Vendor’s or its employees’ possession, care, custody or control, with a minimum limit per event of $1,000,000.00. Customer shall be designated as a “loss payee” as its interest may appear under this policy. However, loss payments hereunder shall not include any loss to the extent such loss results from the dishonest acts of the employees of Customer.
(f) Errors and Omissions Liability Insurance covering liability for loss or damage due to an act, error, omission or negligence, with a minimum limit per event of $5,000,000.
17.2 Insurance Provisions.
(a) The insurance coverages described above that include Customer as an additional insured (i.e. the Commercial General Liability and Automobile Liability policies) shall be primary, and all coverage shall be non-contributing with respect to any other insurance or self insurance which may be maintained by Customer and is primary and noncontributory with respect to liability arising out of Vendor’s negligence and as respects this Agreement only. All coverages described above shall contain the standard separation of insureds provisions regarding Customer. To the extent any coverage is written on a claims-made basis, it shall have a retroactive date no later than the Effective Date and shall be maintained for a period of two (2) years after the expiration or premature termination of this Agreement.
(b) Vendor shall provide certificates of insurance evidencing that the coverages and policy endorsements required under this Agreement are in force and should any of the policies described herein be cancelled before the expiration date thereof, the insurer affording coverage will endeavor to mail 30 days written notice to the certificate holder named herein, but failure to mail such notice shall impose no obligation of liability of any kind upon the insurer affording coverage, its agents or representatives. The insurers selected by Vendor shall have an A.M. Best rating of A-, Size VII or better, or, if such ratings are no longer available, with a comparable rating from a recognized insurance rating agency. Vendor shall assure that all Approved Subcontractors, if any, maintain insurance coverages described above naming Vendor as an additional insured where relevant.
(c) In the case of loss or damage or other event that requires notice or other action under the terms of any insurance coverage described above, Vendor shall be solely responsible to take such action. Vendor shall provide Customer with contemporaneous notice and with such other information as Customer may request regarding the event.
(d) Vendor’s obligation to maintain insurance coverage in specified amounts shall not act as a limitation or expansion on any other liability or obligation which Vendor would otherwise have under this Agreement.
Example 11: From a Manufacturing and Supply Agreement
19.1 For so, long as this Agreement is in effect, each PARTY shall procure and maintain, at its own expense, insurance policies, including product liability insurance, adequate to cover its obligations hereunder and which are consistent with normal business practices of prudent similarly situated companies. Such policies shall provide protection against claims, demands and causes of action arising out of any defects, alleged or otherwise, of Product and Finished Product.
19.2 All of the foregoing policies shall be primary and noncontributory and shall include as an additional named insured the other PARTY. Each policy will be endorsed to provide that the insurers will give the other PARTY, or its designee, not less than 30 days prior written notice of any cancellation or material change in coverage. The policies shall be written by insurance companies with an A.M. Best rating of A-VIII or higher.
19.3 If a PARTY fails to place or maintain insurance as required under this Agreement, the other PARTY of its designee may place and maintain such policy and all premium and other costs incurred by the other PARTY or its designee will be due to the first PARTY, which shall be entitled to offer such amounts against any other amounts due the second PARTY under this Agreement.
Example 12: From a Master License Agreement
23.1. The Licensee shall take out and maintain with a reputable insurance company to be approved by the Licensor such insurance policies subject to such minimum sums insured and other conditions as may be reasonably required by the Licensor.
23.2. The Licensee shall use all reasonable efforts to have the Licensor’s interest noted on such policy which shall stipulate that the Licensor is to receive not less than thirty days’ notice of cancellation of such policies, provided that if this cannot be achieved despite such efforts then the Licensee shall advise the Licensor of any such cancellation within 7 days of becoming aware thereof. The Licensee shall forward to the Licensor a photocopy of such insurance policies and all renewals.
Example 13: From an Agency Agreement
Section 11. Insurance.
11.1 Merchant’s Liability Insurance. Merchant shall continue until the Owned Property Termination Date and the Leased Property Termination Date, in such amounts as it currently has in effect, all of its liability insurance policies including, but not limited to, products liability, comprehensive public liability, auto liability and umbrella liability insurance, covering injuries to persons and property in, or in connection with Merchant’s operation of the Stores, and shall cause Agent to be named an additional named insured with respect to all such policies. Prior to the Sale Commencement Date, Merchant shall deliver to Agent certificates evidencing such insurance setting forth the duration thereof and naming Agent as an additional named insured, in form reasonably satisfactory to Agent. All such policies shall require at least thirty (30) days’ prior notice to Agent of cancellation, non-renewal or material change. In the event of a claim under any such policies, Agent shall be responsible for the payment of all deductibles, retentions or self-insured amounts.
11.2 Merchant’s Casualty Insurance. Merchant shall continue until the Owned Property Termination Date and the Leased Property Termination Date, in such amounts as it currently has in effect, fire, flood, theft and extended coverage casualty insurance covering the Merchandise in a total amount equal to no less than the cost value thereof. In the event of a loss to the Merchandise on or after the date of this Agreement, the proceeds of such insurance attributable to the Merchandise shall constitute Proceeds. Prior to the Sale Commencement Date, Merchant shall deliver to Agent certificates evidencing such insurance setting forth the duration thereof, in form and substance reasonably satisfactory to Agent. All such policies shall require at least thirty (30) days’ prior notice to Agent of cancellation, non-renewal or material change. In the event of a claim under any such policies, Agent shall be responsible for the payment of all deductibles, retentions or self-insured amounts.
11.3 Workers’ Compensation Insurance. Merchant shall continue until the Sale Termination Date, workers’ compensation insurance (including employer liability insurance) covering all Retained Employees in compliance with all statutory requirements. Prior to the Sale Commencement Date, Merchant shall deliver to Agent a certificate of its insurance broker or carrier evidencing such insurance. In the event of a claim under any such policies related to a Retained Employee for an event during the Sale Term, Agent shall be responsible for the payment of all deductibles, retentions or self-insured amounts.
11.4 Agent’s Insurance. Agent shall maintain, at Agent’s sole cost and expense throughout the Sale Term, in such amounts reasonably required to cover the risks insured, comprehensive public liability and automobile liability insurance policies covering injuries to persons and property in or in connection with Agent’s agency at the Stores, and shall cause Merchant to be named an additional insured with respect to such policies. As soon as is practicable after the Sale Commencement Date, Agent shall deliver to Merchant certificates evidencing such insurance policies, setting forth the duration thereof and naming Merchant as an additional insured, in form and substance reasonably satisfactory to Merchant. In the event of a claim under such policies, Agent shall be responsible for the payment of all deductibles, retentions or self-insured amounts thereunder)…
Section 15. Owned/Leased Real Estate Disposition…
15.2 Title Insurance. On or before January 30, 2002, Merchant shall cause the Title Company to deliver to Agent (or its designee) a title insurance commitment (a “Title Commitment”) for an ALTA Owner’s Policy of Title Insurance for each parcel of the Owned Real Property, in such amount as Merchant and Agent reasonably agree to be the fair market value of the Owned Real Property, insuring Agent’s (or its designee’s) interest therein in each parcel of the Owned Real Property as of the Owned Real Property Closing Date, subject only to Permitted Encumbrances. On the Owned Real Property Closing Date, Merchant shall cause the Title Company to issue a title insurance policy based upon the Title Commitment (the “Title Policy”). Merchant and Agent shall split equally all costs for the Title Commitment and the Title Policy. Agent acknowledges that Merchant has already paid for the cost of the Title Commitment, and on February 15, 2002 shall pay to Merchant an amount equal to the cost for one-half of the costs of the Title Commitments for all parcels of Owned Real Property for which a Title Drop Out Notice has not been delivered on or prior to such date.
Example 14: From a Professional Services Agreement
- Insurance. Consultant shall obtain and maintain on and after the Effective Date, the insurance described below, with insurers reasonably acceptable to Client, and shall provide Client with evidence of such insurance upon request:
(1) Worker’s compensation insurance in forms required by Applicable Law with limits of not less than $1,000,000 per accident, $1,000,000 for disease, and $1,000,000 for each employee;
(2) Comprehensive general liability insurance (excluding automobile liability) covering personal injury and property damage to third parties with limits of not less than $5,000,000 per occurrence and $5,000,000 in the aggregate;
(3) Automobile liability insurance covering owned and leased vehicles used in the performance of Services pursuant to this Agreement covering personal injury and property damage to third parties with limits of not less than $5,000,000 per occurrence; and
(4) Professional liability insurance (errors and omissions) for professional services with a minimum single limit of $5,000,000 to cover claims arising out of Consultant’s Services.
Example 15: From a Supply Agreement
- INSURANCE. Each Party shall, and shall ensure that their respective Affiliates shall, take out and maintain such types and amounts of liability insurance or, if applicable, self-insurance to cover liabilities related to its activities under this Supply Agreement as is normal and customary in the pharmaceutical industry generally for Persons similarly situated, and shall upon request provide to the other Party evidence of such insurance coverage. Such insurance coverage shall remain in effect throughout the Supply Term and for a period of three years thereafter.