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Question: insurance procurement clause
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Ken,
We purchased the SALES contacts years back and finally had a potential
residential client inquire about the INSURANCE section:
INSURANCE: The Buyer shall maintain a policy of public liability, property
damage, burglary and theft insurance under which Alarm CO and the Buyer are
named as insured, and under which the insurer agrees to indemnify and hold
Alarm CO harmless from and against all costs, expenses including attorneys'
fees and liability arising out of or based upon any and all claims,
injuries and damages arising under this agreement, including, but not
limited to, those claims, injuries and damages contributed to by Alarm CO
negligent performance to any degree or its failure to perform any
obligation. The minimum limits of liability of such insurance shall be one
million dollars for any injury or death, and property damage, burglary and
theft coverage in an amount necessary to indemnify Buyer for property on
its premises. Alarm CO shall not be responsible for any portion of any loss
or damage which is recovered or recoverable by the Buyer from insurance
covering such loss or damage or for such loss or damage against which the
Buyer is indemnified or insured.
The client said they don't have a million dollar insurance policy for that
they didn't think and that the other insurance companies are requiring it.
So I quickly asked my insurance agent to get his point of view and he said
that he thought they would have a hard time getting a residential insurance
company to name us as additional insurers and that the wording seemed to be
more for subcontractor. He said he wasn't a lawyer so for me to check as to
what this is really for but that he hadn't seen this before.
Is this clause for the commercial market or do we really need it in the
residential market too? Looking at the another super large security
vendor's contract that you can find online, I don't see this type of
request. Theirs is a lengthy section in bold that pretty much says that the
payments aren't for insurance, that the homeowner is responsible for
insurance and that the client can't hold them liable.
Please let me know what to do.
Thanks!
GB
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Answer
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We include the insurance procurement provision in all of the Standard Form Agreements. Why? Because it shifts responsibility for carrying insurance to insure against a loss suffered by the subscriber related to the alarm system. This is probably the single most ignored provision in the agreement. Your subscriber won't comply with it and you most likely won't make an issue of it.
But the provision belongs in the agreement. It requires your sub to name you as additional insured. The most salient aspect of the provision is that it will prevent the sub's carrier from suing you under subrogation because a carrier can't sue its own insured [though some are dumb enough to try].
I typically give this provision up in negotiations if I have to; other provisions are easier to justify and work just as well. So keep it in and delete it if it becomes an issue.
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comment on additional insured
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Ken
As additional insured they can attach the policy if the plumber falls and increases the size of his but crack. As an additional insured the co that holds the cert is a part of your policy. One should limit, in writing, on the cert, liability that pertains to any actions of the alarm co and not others.
Mike
CSS
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Response
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Additional insured status can be limited and generally is limited to some negligence by the primary insured. That can be changed to make your policy primary for the subscriber - additional insured. Your insurance broker should know the difference and get the endorsement worded correctly. However, be warned that the wording of the additional insured endorsement will need to comply with the terms of the contract you have agreed to, or are about to agree to, with your subscriber, your subcontractor or vendor, whoever you happen to be going to contract with. Before agreeing to terms in a contract make sure you can comply and make sure you know the cost of complying, This applies to other contract issues but the insurance issue is top of the list.
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