Presenting a live 90-minute webinar with interactive Q&A Drafting Insurance Requirement Provisions in Commercial Contracts Mitigating Risk and Maximizing Coverage for Losses, Navigating Interplay With Contractual Indemnification MONDAY, JUNE 29, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Katie Pfeifer, Partner, Dorsey & Whitney , Minneapolis Damian J. Arguello, Partner, Davis Graham & Stubbs , Denver Joseph G. Balice, Partner, Ezra Brutzkus Gubner , Woodland Hills , Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Drafting Insurance Requirement Provisions In Commercial Contracts Part I: Determining The Type And Amount of Insurance Coverage Joseph G. Balice Ezra Brutzkus Gubner LLP jbalice@ebg-law.com
Disclaimer The views expressed by the participants in this program are not those of the participants’ employers, their clients, or any other organization. The opinions expressed do not constitute legal advice, or risk management advice. The views discussed are for educational purposes only, and provided only for use during this session. 6
As a partner in the commercial civil litigation team at Ezra Brutzkus Gubner in Los Angeles, Joe’s core practice is representing policyholders when insurance company carriers deny claims. Prior to joining EBG, Joe worked as part of the nationally-recognized Insurance Recovery practice group in the firm of Anderson Kill. He has worked on virtually all lines of commercial and professional insurance (CGL, D&O, E&O, EPLI, property, crime, etc.), and has personally helped clients collectively recover over $400 million in insurance policy benefits throughout his career. http://www.ebg-law.com/our- professionals/joseph-g-balice 7
Insurance Requirement Clauses ◦ What Are They? A provision in a contract requiring one of the parties to buy insurance to cover risk associated with the transaction Two Varieties: ◦ Party Must Buy Insurance Covering Itself ◦ Party Must Buy Insurance Covering Others 8
Why Do We Care? ◦ Risk Management Decreasing Risk Of Peril Shifting Financial Consequences of Peril ◦ Financial Resources For Obligations/Liabilities Show Me The Money 9
Two Strategic Concerns ◦ Drafting How do we write provisions that protect us? ◦ Enforcement How do get the most of our contract rights? 10
Proactive vs. Retroactive Enforcement ◦ Enforce compliance or recover damages? ◦ Purpose Of Provision: Ensure Financial Resources ◦ Failure To Comply: Breach of Contract Claim ◦ Breach Claim Only As Valuable As Contracting Party’s Financial Resources This Is Why You Required They Get Insurance In the First Place Insurance Requirement Clauses Are Useful If Proactively Enforced 11
What To Include: ◦ Lines of Insurance ◦ Who is Covered? ◦ Limits of Liability – How Much Coverage? ◦ Carrier Rating ◦ Right To Receive Coverage Documents, Carrier Notices ◦ Other Essential Terms of Coverage Enforcement Tip: Specificity in drafting facilitates a clearer path to recovery for breach and enforcement. 12
How Do We Know What To Require: Two Step Process: ◦ Identify Risks Associated With The Transaction ◦ Identify The Insurance Products Available To Cover Those Risks Call The Brokers: This Is What They Do. 13
What Lines of Coverage To Get, Part 1: ◦ Commercial General Liability ◦ Property ◦ Workers’ Compensation ◦ Automobile Liability 14
What Lines Of Coverage To Get, Part 2 ◦ Fidelity Bond/Crime Coverage ◦ Errors & Omissions Liability ◦ Directors & Officers Liability ◦ Employment Practices Liability 15
What Lines Of Coverage To Get, Part 3 ◦ Cyber Risk Coverage ◦ Intellectual Property ◦ Key Person Insurance 16
Evolving Risks ◦ Risk Over Life of Transaction Not Static ◦ Risks Can Change In Both Nature and Scope ◦ Long Term Contract Without Provisions To Revisit Insurance Requirements Dangerous 17
Coverage Reviews ◦ The Right To Review The Coverage Requirements Under The Contract And Request Changes All Requirements Subject To Review: Lines of Coverage, Limits, Terms, Etc. Right To Demand Reasonable Changes To Coverage ◦ Regularly Scheduled/As Reasonably Necessary 18
DRAFTING INSURANCE REQUIREMENT PROVISIONS IN COMMERCIAL CONTRACTS JUNE 29, 2015 ADDITIONAL INSURED COVERAGE DAMIAN J. ARGUELLO, PARTNER DAVIS GRAHAM & STUBBS LLP DENVER, COLORADO DAMIAN.ARGUELLO@DGSLAW.COM Davis Graham & Stubbs LLP DGSLAW.COM
SPEAKER’S BIO Damian Arguello is the co-leader of the insurance and risk management practice group at Davis Graham & Stubbs LLP in Denver, Colorado. Damian primarily represents policyholders with respect to insurance coverage issues. Before law school, Damian was the claims manager and errors & omissions coordinator for Talbot, a major insurance brokerage, where he mediated coverage disputes between policyholders and insurers, and also led the brokerage’s internal risk management program. Prior to that, Damian was multi-line claims adjuster for Crawford & Company and CNA Insurance Companies. Davis Graham & Stubbs LLP DGSLAW.COM 20
WHAT IS ADDITIONAL INSURED COVERAGE? Form of contractual risk transfer Require other “downstream” party to contract to name requesting party as an additional insured under downstream party’s insurance Force downstream party’s insurer to bear primary risk of loss Preserve upstream party’s insurance and reduce insurance costs Davis Graham & Stubbs LLP DGSLAW.COM 21
WHAT IS ADDITIONAL INSURED COVERAGE? Problems for downstream party: – Could be insuring upstream party’s sole negligence – Insured claims could be only tangentially connected to downstream party’s operations, resulting in disproportionate risk transfer – Dilution of downstream party’s policy limits – Increased insurance costs Davis Graham & Stubbs LLP DGSLAW.COM 22
REQUIRED INSURANCE VS. ADDITIONAL INSURED COVERAGE Merely requiring downstream/opposing party to carry insurance does not automatically equate to additional insured coverage – Language unequivocally requiring additional insured coverage usually necessary Certain policies not amenable to additional insured coverage – Professional – Workers’ compensation Davis Graham & Stubbs LLP DGSLAW.COM 23
ADDITIONAL INSURED COVERAGE VS. COVERAGE FOR INDEMNITY OBLIGATIONS Contrary to popular belief, CGL does not exclude contractual liability (not entirely) – Standard ISO form provides limited “give - back” coverage for named insured’s assumption of another’s tort liability in an “insured contract” – Indemnitee becomes another claimant under policy, indemnification coverage subject to limits – No direct rights as an “insured” – Defense could be in addition to limits if numerous conditions met Davis Graham & Stubbs LLP DGSLAW.COM 24
ADDITIONAL INSURED COVERAGE VS. COVERAGE FOR INDEMNITY OBLIGATIONS additional insured gets direct policy rights as an insured – Right to defense in addition to limits (most policies) – Separation of insureds clause – policy applies to each insured separately – Get own separate counsel – Insurer owes duties to additional insured, including good faith Fewer conditions to meet to reap defense and indemnity benefits Davis Graham & Stubbs LLP DGSLAW.COM 25
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