The contracts your insureds enter into often create an additional workload for your staff, as well as an incre
ased opportunity for agency errors and omissions (E&O) claims and lawsuits from both your customers and th
eir business partners. On October 9, I’ll be presenting a webinar f
or Insurance Journal’s Academy of Insurance called “Forward Into The
Past: Certificates of Insurance, Additional Insureds, and Other Contractual Risk Transfer Issues.”
This webinar examines the issues and disputes that invariably arise from your customers’ contractual promis
es and obligations. By providing scores of real-life examples, emphasis will be placed on how to recognize the issues, u
nderstand their potential impact on all parties, how courts are interpreti
aims and suits arising from the issues. I hope you’ll consider registering for this program.
Since mentioning on LinkedIn a couple of months ago that this webinar was in the planning stages, I’ve been inundated w
ith questions that would be of interest to webinar participants. These inq
uiries form the basis for this month’s column. The webinar will be more str
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uctured and focused, but in the meantime, let me address some rand
m thoughts that have come up while piecing together the webinar content.
Belts and Suspenders
A business partner potentially can be covered under someone
else’s CGL policy as an indemnitee and/or an additional insured (AI). I find that many agents do not understand the dis
tinction or the ramifications of this type of “belt and suspenders” approach that reduces the risk of there not being coverage.
For example, under an ISO AI form, the AI is not covered for its sole negligence, but defense is provided outsid
e of policy limits. On the other hand, as an indemnitee under any available contractual liability coverage fro
m another’s ISO CGL policy, the indemnitee may be covered for its sole negligence, but defense costs are included within the policy limits.
An analogy might be renting a car. In most instances, I usually recommend buying the rental company’s los
s damage waiver even though the renter has auto physical damage cove
rage. Each of these approaches cover something the other doesn’t. Belt and suspenders.
Dealing With Onerous COI Requests
The first step in addressing COI requests that are inappropriate, impossible, and/or illegal is recognizing the
ones that are inappropriate, impossible, and/or illegal. Keep in mind that there is usually no downside to the requestor asking for specific language on a COI, how
ever outlandish or in conflict with policy language, unless the state has a law, regulation, or DOI directive prohibiting this practice.
It is imperative that agency staff be able to identify such l
anguage, understand why it shouldn’t be included on the COI, and explain why to the requestor. I
n addition, the agency should actively engage in educating customers about how to negotiate such requests from the contracts they review.