The lawyers at O’Reilly Law Group had a recent opportunity to assist a client with a review and editing of a contract that required insurance. While contract required both parties to maintain insurance with certain limits, it included no additional language. We found that neither party (including the attorney representing the other party) had any clear notion of the difference between contractually requiring insurance and crafting an insurance clause that had actual meaning and offered real protection.
Breach of Contract. The clause submitted to our client required insurance but included no other meaningful provisions beyond the stated limits. In the event a claim arose but the required insurance had not been obtained, the only remedy would be one for breach of contract. Since neither party had assets equal to the required limits of insurance, an action for breach of contract would provide limited prospects for recovery.
Certificate of Insurance. Requiring a Certificate of Insurance (sometimes called an Accord Certificate) provides assurance that the other party has obtained the contractually required insurance. That is all it does. Certificates of insurance provide no rights to the certificate holder and do not amend, extend, or alter the coverage provided under the policy. Certificates are issued as a matter of information only and confer no rights to coverage.
Additional Insured. A clause requiring a party to be named as an additional insured provides the greatest level of protection. One party is the primary insured and all other parties listed on the Additional Insured Schedule are also insured under the primary policy. Coverage for the additional insured will be defined by the terms of the policy and the additional insured endorsement, with the most common forms being ISO forms. Professional liability policies typically do no allow (for example) an architect’s client to be an additional insured. Nor, despite frequent requests from owners for additional insured status under the architect’s policy would such coverage (even if available) provide the protection the owner intended.
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