In many contracts, one party agrees to provide insurance protecting and covering the other party.  What kind of insurance is necessary or desirable?  Is the insurance adequate?  Particularly in a contract for services, the type of insurance the service provider carries is often built into the contract price for the services.  It is critical that you check to confirm that your vendor carries the appropriate kind of insurance and in a coverage amounts adequate to protect you if something goes wrong.

Additional insured coverage is the gold standard.  This means the vendor adds the party hiring them as a named insured on their insurance policy, which gives that named insured the right to file a claim against the policy directly.  Additional insured coverage is especially desirable in construction contracts by including the property owner as a named insured.  When additional insured coverage is required as part of a contract, be sure to obtain a certificate of insurance listing the correct legal name of the party to be covered by the additional insurance.

When you are hiring a vendor as a general contractor, or a service to provide labor, you should also require the vendor to document proof of worker’s compensation insurance.  This helps ensure that if anyone working on your property is injured they cannot claim that you are their statutory employer.
If you hire an agent to act for you in any capacity that requires driving, you should require proof of insurance in the form of a declaration sheet showing adequate liability limits to protect you, with appropriate limits for uninsured motorist coverage. 

Do you have agents or third parties that handle money or property in your name?  If so, you should require proof of a fidelity bond, or similar coverage for loss or misappropriation of funds as part of their professional liability coverage.

Are you hiring a professional, such as an architect, engineer or an auditor?  Ask for proof of their professional liability insurance coverage.

As you can image, there are a myriad of insurance products aimed at providing protection to your business.  If you have questions about insurance coverage, or want help drafting or reviewing the insurance provisions of a contract, please contact our Business Law Group attorney, David A. Closson at [email protected].

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