The contracts your insureds enter into often create an additional workload for your staff, as well as an increased opportunity for agency errors and omissions (E&O) claims and lawsuits from both your customers and their business partners. On October 9, I’ll be presenting a webinar for 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 promises and obligations. By providing scores of real-life examples, emphasis will be placed on how to recognize the issues, understand their potential impact on all parties, how courts are interpreting these controversies, and how to respond to claims 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 with questions that would be of interest to webinar participants. These inquiries form the basis for this month’s column. The webinar will be more structured and focused, but in the meantime, let me address some random 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 distinction 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 outside of policy limits. On the other hand, as an indemnitee under any available contractual liability coverage from 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 loss damage waiver even though the renter has auto physical damage coverage. 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, however 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 language, understand why it shouldn’t be included on the COI, and explain why to the requestor. In addition, the agency should actively engage in educating customers about how to negotiate such requests from the contracts they review.