Chubb Insurance has released an informative white paper illustrating the importance for a property owner or manager of real estate to protect themselves with having a properly written contract. One important piece of the process is to obtain certificates of insurance from any third party vendors you do business. The collection of certificates of insurance, additional insured endorsements, and a waiver of subrogation can play an important role in the contractual risk transfer and insurance protection. Simply collecting the certificates does not confirm that contract requirements have been met. It is important to verify the forms are compliant to the contract requirements.
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Below are some items to consider when entering into contracts concerning your buildings and properties. While not all-inclusive, it provides a good starting point to help avoid problems in the future.
- Require that legal counsel review all contracts, including lease and service agreements.
- Whenever possible, use a standard contract rather than a special or manuscripted contract.
- Gain insurance protection by having yourself added to a contractor’s or tenant’s insurance policy as an additional insured. Verify that the insurance coverages include workers compensation, general liability and umbrella insurance, where applicable.
- Review the contract to ensure that there is “indemnification/hold harmless” wording in your favor within the contract.
- Do not waive your right of subrogation with any of your contracted service providers.
- Obtain certificates of insurance to confirm adherence to contractual requirements. Verify that the limits provided on the certificates meet or exceed your own insurance limits and that the insurance company providing the limits is rated a minimum of “A-” by A.M. Best Company, a leading insurance rating firm.
- Maintain a file of all certificates of insurance received from third parties. Review the file on a monthly basis to determine which certificates are in need of updating. Make providing a current certificate of insurance a contract provision.
- Confirm that certificates of insurance are received from all third-party vendors.
- Require contractors to be responsible for all subcontractors, including making sure that insurance specifications and insurance limits are adequate. Require contractors to work safely and maintain safe workplaces.
- Where permissible, contracts should have a provision requiring that the contractor’s or tenant’s insurance is primary and the building owner’s is excess.
Many real estate managers and property owners have contacted myCOI to outsource or automate the collection of certificates. myCOI Central is an intuitive system that can also track endorsements, AM Best rating, and automate the compliance review of the provided certificates. Contact myCOI today for a demo.