INSURANCE REQUIREMENTS IN CONTRACTS

1 This page intentionally left blank for double-sided printing. INSURANCE REQUIREMENTS IN CONTRACTS A PROCEDURE MANUAL Version INTEGRATED INSURANCE & FINANCIAL SERVICES INSURANCE REQUIREMENTS in CONTRACTS Version i This manual was originally developed and placed in public domain to benefit public agencies. Sections of this current edition have been updated by Alliant INSURANCE Services, Inc. The manual is intended to provide general guidelines. Alliant does not warrant or guarantee the legal effect or the appropriate use of the contents. Alliant recommends that users consult with their legal counsel when considering contractual language.

2 Forms from the INSURANCE Services Office (ISO) are reproduced and included with permission of the ISO. INTEGRATED INSURANCE & FINANCIAL SERVICES INSURANCE REQUIREMENTS in CONTRACTS Version ii IRIC VERSION TABLE OF CONTENTS TABLE OF CONTENTS .. ii Foreword .. 1 EMERGING TRENDS .. 3 Frequently Asked Questions .. 4 Introduction - Why Bother?.. 14 Chapter One: Contractual Risk Transfer The Basics .. 15 Step 1: Analyze the Risks and Relationships .. 16 Step 2: Use a Hold Harmless .. 16 Step 3: Select the Appropriate INSURANCE Specifications .. 17 Step 4: Verify Coverage .. 20 Step 5: Report Claims Promptly .. 21 Exhibit A: INSURANCE REQUIREMENTS for most CONTRACTS .. 22 Chapter Two: INSURANCE Specifications for Most CONTRACTS .

3 26 Evaluate the Risk .. 26 Use the Appropriate contract Template .. 26 INSURANCE REQUIREMENTS .. 27 Be as Specific as Possible in Describing Types of INSURANCE Required .. 27 Describe Maximum Deductibles or Self-Insured Retentions that the Other Party may Maintain .. 27 How to Evaluate a SIR .. 28 Require the Addition of your Entity, its Officials, Employees and Volunteers as Additional Insureds to all Required Liability Coverage .. 29 Require that the Other Party s INSURANCE be Primary .. 29 Require that Your Entity be Given at least Thirty (30) Days Notice of Cancellation of INSURANCE Coverage, with Ten Days Notice for Non-Payment .. 30 Specify that the INSURANCE is to be Placed with Insurers that Meet a Certain Minimum Rating, Unless Otherwise Acceptable to Your Entity.

4 30 Fit the INSURANCE Limits to the Situation .. 31 How Much is Enough? .. 32 Aggregate Limits .. 32 The Myth of Following Form Excess INSURANCE Policies for Higher Limits .. 33 Specify how Long the INSURANCE Must Remain in Effect for the Project or Lease .. 36 For Construction Projects or Claims-Made Policies .. 36 Professional Services CONTRACTS .. 36 Professional Liability INSURANCE .. 37 Additional Insured Status .. 37 Claims-Made Coverage .. 37 Auto INSURANCE .. 39 Additional Insured Status .. 39 Workers Compensation .. 40 Independent Consultant Status .. 40 indemnity Limitations .. 40 Property INSURANCE .. 41 INTEGRATED INSURANCE & FINANCIAL SERVICES INSURANCE REQUIREMENTS in CONTRACTS Version iii Tenant s Improvements and Betterments.

5 41 Fire Legal Liability .. 41 INSURANCE REQUIREMENTS for Lessees Exceptions for the Civic Center Act .. 42 INSURANCE Specifications for Common Situations .. 44 Sample Instructions for the Contractor, to be included as an attachment with the applicable INSURANCE REQUIREMENTS .. 48 Sample Notice to Bidders regarding indemnity and INSURANCE REQUIREMENTS (may also be used with Purchase Orders) .. 49 Exhibit 1: INSURANCE REQUIREMENTS for Most CONTRACTS .. 50 Exhibit 2: INSURANCE REQUIREMENTS for Professional Services .. 54 Exhibit 3: INSURANCE REQUIREMENTS for Lessees .. 57 Exhibit 4: INSURANCE REQUIREMENTS for Vendors .. 60 Chapter Three: Construction & Environmental Services .. 63 Construction CONTRACTS .. 63 What is a Construction contract ?

6 63 Unique Construction contract Provisions .. 64 Surety Bonds .. 64 Bid Bond .. 65 Performance Bond .. 65 Payment Bond .. 65 Subdivision or Completion Bond .. 65 Builder s Risk INSURANCE (Course of Construction) .. 66 Installation Floater .. 67 Consolidated INSURANCE Programs (Wrap-Ups) .. 67 NEW Wrap up Exclusion from ISO .. 69 Environmental Contractors and Consultants .. 71 Transporters of Hazardous Materials and Wastes .. 73 Owners and Contractors Protective (OCP) Coverage .. 74 Railroad Protective Liability .. 74 Exhibit 5: INSURANCE REQUIREMENTS for Construction CONTRACTS .. 77 Exhibit 6: INSURANCE REQUIREMENTS for Environmental Contractors and/or Consultants .. 81 Performance Bond .. 85 Payment (Labor & Materials) Bond.

7 86 Chapter Four: Agreements Including Cyber Risks .. 88 Cyber Risks & Electronic Data Processing (EDP) .. 88 Exhibit 7: INSURANCE REQUIREMENTS for Agreements Involving Information Technology .. 95 Chapter Five: Aviation Related Risks .. 99 Aviation Risks .. 99 Classes of Aviation Liability Exposures .. 99 Aviation Airport Liability / Fixed Based Operator s Liability .. 100 Unmanned Aerial Systems aka Drones .. 101 Exhibit 8: Sample INSURANCE REQUIREMENTS for Airport, Airport Operations and FBOs .. 104 Exhibit 9: Sample INSURANCE REQUIREMENTS for the Use of UAS .. 108 Charter Aircraft Services .. 111 Exhibit 10: Sample INSURANCE REQUIREMENTS for Chartering for Aircraft .. 112 Chapter Six: Marine Related Risks.

8 115 Marine Risks .. 115 Exhibit 11: Sample INSURANCE REQUIREMENTS for Marine Risk Exposures .. 119 INTEGRATED INSURANCE & FINANCIAL SERVICES INSURANCE REQUIREMENTS in CONTRACTS Version iv Chapter Seven: Special Situations .. 124 Teaching, Coaching, and Childcare .. 124 CONTRACTS with Private Parties .. 124 Instructors .. 125 Special Events & Short Term Rentals .. 125 Carnival Rides .. 126 Food Trucks/Farmers Markets .. 126 CONTRACTS Involving Cash/Receipts Handling Fidelity Bonds & Crime INSURANCE .. 127 California State University (CSU) Special Events Resource Guide (SERG) .. 127 Other Specialized Professional Liability INSURANCE .. 128 Investment Bankers Errors and Omissions INSURANCE .. 128 Garagekeeper s Legal Liability INSURANCE .

9 128 Exhibit 12: INSURANCE REQUIREMENTS for Rental of Facilities .. 129 Exhibit 13: INSURANCE REQUIREMENTS for Instructors .. 132 Chapter Eight: Schools and Other Youth-Serving Organizations .. 135 Use of Facilities .. 135 Third Party Instructors .. 136 Special Events .. 136 Student Placement Agreements .. 137 Sexual Abuse and Molestation (SAM) Liability .. 137 Transportation Risks .. 138 Exhibit 14: INSURANCE REQUIREMENTS for Bus and Transportation CONTRACTS .. 139 Chapter Nine: Verify Coverages .. 142 Typical Contractors INSURANCE Program .. 142 Certificates of INSURANCE Guidelines .. 143 Additional Insured Endorsements .. 146 Other Endorsements .. 154 Primary INSURANCE .. 154 Waiver of Subrogation .. 154 Notice of Cancellation.

10 155 Customized Endorsements .. 155 Entity Supplied .. 155 Appendix A: Risk Assessment .. 157 Severity-Related Questions for the contract Risk Analyst .. 158 Checklist for Evidence of INSURANCE .. 160 Appendix B: Common INSURANCE Industry Forms .. 163 Appendix C: Sample Hold Harmless Agreements .. 223 Appendix D: Sample Checklists .. 231 Appendix E: Resources .. 237 INTEGRATED INSURANCE & FINANCIAL SERVICES INSURANCE REQUIREMENTS in CONTRACTS Version 1 FOREWORD The purpose of this manual is to serve as a guide in developing proper INSURANCE REQUIREMENTS in CONTRACTS . This manual explains how to establish INSURANCE REQUIREMENTS for most CONTRACTS , including those with contractors, professional service providers, tenants, vendors, and users of public property, and how to verify their compliance with those REQUIREMENTS during the term of the contract .