The Basics of Contractual Risk Transfer, Additional Insureds and Certificates of Insurance

Description

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Contractual risk transfer is a common risk management technique. The purpose is to push the responsibility for any injury or damage down to the party closest to and best able to control the operation or the outcome of the person or entity doing the work. Upper-tier contractors have the potential to be held vicariously liable for the actions of their subcontractors, so they use contractual risk transfer as one method for mitigating their exposure; that’s just good risk management.

Beyond contractual risk transfer, upper tiers generally place-specific insurance requirements on the lower tier (or downstream) contractor. One of these requirements is that the lower tier name the upper tier (the upstream contractor) as an Additional Insured on its policy. What effect does this have on the lower tier’s coverage?  

With all the contractual risk transfer and insurance requirements in place, the upper tier is going to ask for proof that the lower tier has complied with all the requirements by providing a Certificate of Insurance. The problem with certificates is all the weird and excessive wording sometimes requested or required. Should the agent comply with these requirements?

In this class, we discuss:

• The basics of contractual risk transfer; how it is accomplished and key provisions agents should look for and look out for;
• How Additional Insured status affects the lower tier’s policy and protection; and
• The do’s and don’ts of Certificates of Insurance.

Approved for 4 NJCE Credits