Presenting a live 90-minute webinar with interactive Q&A Commercial Real Estate Risk Mitigation: Contractual Indemnity, AI Endorsements and Certificates of Insurance Structuring and Coordinating Insurance, Indemnities, Additional Insured Status and Insurance Certificates THURS DAY, APRIL 3, 2014 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: Michael S . Hale, President, Clairmont Advisors , Northville, Mich. uit, Partner, Carrington Coleman Sloman & Blumenthal , Dallas Neal J. S 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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Webinar Section I Presented By : Michael S. Hale, J.D., CPCU, AAI Clairmont Advisors, LLC Northville, MI Thursday, April 3, 2014 1:00pm-2:30pm EDT Strafford Webinars 5
Parties to real estate transactions and their counsel often overlook key insurance issues and overly rely upon certificates of insurance. While attorneys cannot be all things to all people, it is worth the time to carefully address insurance and indemnity provisions. Insurance errors are rampant and can expose you and your clients to disaster. 6
Additionally, this webinar will provide you with a checklist on frequently found gaps in business insurance programs. Recent updates in certificates of insurance being used to evidence coverage present substantial issues for drafters of contracts and leases. 7
New additional insured endorsements to Commercial General Liability (CGL)policies add to the complexities for the attorney drafter. Indemnification provisions do not often track with the insurance coverage being provided. 8
Certificates of insurance should, for most purposes, be assumed to have little effect. Such certificates not only say they are for information only and do not change the policy, they are almost always drafted by insurance agents who may be legal agents of the policyholder and not the insurer. Thus, the certificates are not likely binding on many insurers, who are quick to ask agents not to even send them copies. 9
Certificates include disclaimer language that the holder should not rely upon the certificate. The certificate is only one page and does not reference key coverage provisions or gaps. See example of a certificate on the next slide. 10
“THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER.” 11
THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. 12
IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). 13
CANCELLATION “Should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions.” 14
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. 15
Special Conditions RE: Leased/Rented Equipment “The Certificate Holder is a Loss Payee.” 16
The Acord 25 Certificate of Insurance replaces an older version. This new certificate includes no representation at all that the insurer (or agent) will provide any notice to a listed additional insured. This presents major concerns when representing landlords or construction project owners. 17
Notably, mortgagees are usually protected by the property insurance policy protecting the real property collateral. This may not, however, be the case as respects business inventory lien holders. In light of the above, be very cautious about your client agreeing to language that requires notification of cancellation or material change to the other party. 18
There are at least over 31 different types of additional insured endorsements available on a standard CGL policy. This includes additional insured club members, charitable institutions, volunteers, executors, administrators, lessors and many other types. Which endorsement is right for your client? 19
Additional insureds do not have the same rights as named insureds. Additional named insured is usually not doable unless same ownership as other named insureds. Even though a landlord, for example, may be listed as an additional insured on the other party’s liability insurance policy, such coverage is only derivative of the negligence of the named insured tenant. 20
1993 Endorsement Stated: WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured. 21
The 2004 revisions created the greatest change, deleting the favorable (from the insured's perspective) "arising out of" language from the policy and inserted in its place the phrase "caused in whole or in part" by the acts or omissions of the named insured or those acting on the named insured's behalf at designated locations. 22
The 2013 endorsements begin with a broad "HOWEVER," narrowing coverage such that insurance afforded to an additional insured (1) only applies as permitted by law, and (2) if such coverage is required by contract, the coverage afforded "will not be broader than that which you are required by the contract or agreement to provide for such additional insured." 23
“Primary and noncontributory” additional insured language in a contract’s insurance provisions can be important to the additional insured but warrants caution. Many CGL policies do not automatically contain such language which purports to elevate the additional insured to primary status on the named insured’s policy. 24
“Blanket” additional insured endorsements may extend coverage but should not always be relied upon. There is an endorsement available on the CGL policies of many insurers that will provide “automatic” additional insured status where this is required by a written contract including a lease. Such endorsements can sometimes limit coverage in certain ways such as excluding coverage for renovations or improvements made to real estate. 25
Requirements to name additional insureds should not apply to all of the defined policies. This is a common mistake. Workers’ compensation, for example, is not a policy on which an additional insured can be listed. 26
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