Let’s be honest—obtaining clarity on both a contract and the related insurance compliance has turned into one of the most daunting tasks for “upstream” parties like landlords, owners, and operators. When reviewing vendor contracts, are you confident that your insurance compliance is fact, or are you relying on fiction?
Here are five key points to consider when verifying whether your insurance compliance is airtight or just wishful thinking:
1. Contract Clarity: Fiction or Reality?
If the contract with your counterparty isn’t clear, you could be setting yourself up for a nightmare down the road. A legitimate, fact-based contract should include commercially reasonable insurance terms and limits that protect your interests. Additionally, make sure it allows for the upstream party to be added as an additional insured—this isn’t just a nice-to-have; it’s essential.
2. Risk-Related Provisions: Fact or Fluff?
Many contracts fail to include critical provisions, leaving you vulnerable to significant risks. Are the following key risk-related clauses included, or are you relying on the fiction that you’re covered when you’re not?
- Mutual Waiver of Subrogation: Ensures that neither party can sue the other for damages covered by insurance.
- Primary and Non-Contributory Coverage: The counterparty’s insurance must come first, with no contribution from your own policy.
- Unlimited Liability Beyond Insurance Proceeds: You need to ensure the counterparty’s liability isn’t limited to their insurance proceeds, which could leave you with uncovered losses.
If these provisions aren’t included, it’s time to rewrite the story.
3. Insurance Coverage: Verified or Just Make-Believe?
The sad reality is that Certificates of Insurance (COIs) aren’t always what they seem—most aren’t worth the paper they’re printed on. So, how can you avoid falling into the fiction trap?
Instead of accepting COIs at face value, ask for “evidence of insurance satisfactory to [Owner].” This means verifying that coverage exists and ensuring there are no exclusions in the downstream party’s insurance that could render the policy useless when you need it most.
Of course, you could go all-out and request full policies (with redacted premiums), but let’s be real—do you or your colleagues want to read through each one? I think not. There’s a better solution.
4. The “Proof of Insurance Cocktail”: Fact-Checking Made Simple
Here’s a fact-based strategy to ensure your coverage is solid: a “proof of insurance cocktail.” This practical solution includes:
- A properly filled-out certificate of insurance.
- The relevant ACORD form (ACORD 25 for liability, ACORD 25 + ACORD 855 for construction, ACORD 28 for leasehold improvements, etc.).
- Copies of declarations pages.
- Specific endorsements like additional insured, waiver of subrogation, and primary and non-contributory status.
By gathering these documents, you can rest easy knowing your insurance compliance is based on fact, not fiction.
5. Monitoring Compliance: Fact or Fiction?
Tracking insurance compliance isn’t a one-time task—it’s an ongoing process that requires constant vigilance. If you’ve ever thought “I’ve got this under control,” only to realize that renewal dates have passed or coverage documents are missing, you know how quickly fiction can creep into your process.
For smaller portfolios, an Excel spreadsheet might be enough to manage fewer than 100 certificates. However, if you’re handling more vendors, the effort involved in continuous follow-up becomes a full-time job. At The ALS Group, we provide proactive monitoring services to keep you on top of renewals and ensure continuous compliance.
The ALS Group: Turning Compliance Fiction Into Fact
Navigating the world of insurance compliance doesn’t have to be a guessing game. At The ALS Group, we’ve developed a comprehensive suite of services to tackle the toughest compliance challenges head-on. Our team will:
- Evaluate insurance endorsements, declarations pages, and forms listings.
- Draft and assess insurance and indemnification provisions.
- Review contracts, contact brokers, and counterparties.
- Proactively drive compliance to make sure you’re protected every step of the way.
Don’t let your insurance compliance be a work of fiction. Reach out to The ALS Group today to ensure you’re operating on facts, not just assumptions.
If you need more information about the topics in this article, or any help with compliance issues, please contact Albert Sica, Managing Principal, at 732.395.4251 or [email protected].
