Contractual Risk Transfer and Other Insurance Requirements When Working with Vendors and Subcontractors

Contractual Risk Transfer and Other Insurance Requirements When Working with Vendors and Subcontractors

Construction or updating projects at any property come with potential financial and operational risks for historic property owners working with third-party providers of products and services. One way to alleviate risks is to invest into a Contractual Risk Transfer (CRT) program, which helps to mitigate some of the risks involved with any construction project. From injury to property damage, this component of historic commercial property insurance can outline the responsibilities of each party before work starts for everyone.

What is Contractual Risk Transfer?

When you work with partners and other parties on a project, such as contractors, subcontractors, vendors, and service providers, you may be held liable for their actions or negligence. Additionally, general risk management procedures and insurance policies don’t cover others, you could be on the hook for major losses.

The best option for those looking for effective historic commercial property insurance coverage is to shift the risk and liability away from you and onto the parties to which it belongs. By drafting a formal business contract with provisions, clauses, and other text that determines who specifically is at fault for certain losses can help to alleviate some stress. Having this contract in place will protect you in the event of a loss or dispute.

Endorsements for CRT

In order to be processed correctly and ensure that liabilities are transferred to the right parties, it’s important to note certain endorsements in contractual risk transfers.

  • Additional Insured Endorsement: This can be to a general liability policy and extends coverage to the additional insured being named in the endorsement. If a blanket additional insured endorsement is referencing written contract, careful review of the language should be executed to make sure that everyone involved is provided coverage.
  • Primary and Non-Contributory Endorsement: States that the vendor’s insurance policy will extend coverage to the additional insured on a primary basis and will not seek certain contributions from the additional insured’s policy.
  • Waiver of Subrogation Endorsement: This endorsement prevents the vendor’s insurance carrier from subrogating or seeking out reimbursement from the person that requested that it be waived.

Other Insurance Coverage to Consider

  • Professional Liability: This should come in at no less than $1,000,000 per occurrence and aggregate to be maintained for the duration of the agreement and three years after its termination.
  • Umbrella or Excess Liability: Not less than $5,000,000 per occurrence, this coverage usually rests above the underlying general liability policy as well as automobile liability and professional liability. Depending on the scope and work to be performed in the agreement, the vendor may require this policy in order to meet the minimum insurance requirements
  • Cyber Risk Insurance: Coming in at no less than $2,000,000 per claim to be maintained for the length of the agreement and three years after its termination. This requirement applies when a third party will be using or accessing private and confidential information.