1. The Subrogation Waiver Clause
Some contract terms require that you or indeed your insurer waive their rights of subrogation against the other party to the contract – known as a ‘Subrogation Waiver’ clause.
If a claim arises due to the fault of the other party, and it is brought against you rather than them, then you cannot pass that claim onto them. This is because you’ve agreed to waive your rights of subrogation against them.
Most insurers are not keen on such clauses as they will have to potentially settle the claim without recourse to the negligent party. It’s therefore important that such clauses are declared to your broker before you agree to them.
It may be possible to change the wording of the clause so that such rights of subrogation are not waived in respect of claims which are as a result of the negligence of the other party for personal injury or property damage, so that insurers retain their rights for potential claims under a public liability policy.
2. Hold Harmless Clause
If you’re signing a contract with a US or International company it may include a contract term known as a Hold harmless clause. Essentially a hold harmless clause means that you may be agreeing to accept all legal liability and responsibility for an action, activity or event and relieve the other party to the contract of any liability with respect to that action, activity or event.
These clauses are common in US contracts and like subrogation waiver clauses to which they are very similar are not popular with insurers.
It may be possible to change the wording of such clauses as per the previous clause but it is essential that such clauses are declared to your insurance company as they are deemed to be a ‘material fact’.
3. Limits of Indemnity
Many contracts will stipulate what limits of indemnity you need to have under your insurance arrangements which may occasionally be higher than you have in place.
Sometimes these levels can seem high in relation to the work that you’re undertaking, or the size of your business. If this is the case, you might be able to amend them - if not then you will need to increase your policy limits with your broker to reflect these requirements.
4. Joint Insured
Finally some contracts may insist on your noting the other party as a ‘Joint Insured’ under your insurance policy. This means that each party shares the same policy, cover, limits and rights to make a claim, however if one party breaches the terms of the policy the other party could be denied cover.
Insurers normally only agree to such a clause if both parties to the contract have a identical interest in the subject matter of the policy which should be borne in mind.
For more information email Tracey McCreath or call on 01223 200655.
Michael C, Private Client