By Lars Olson, Vice President, Property & Casualty, USI Insurance Services LLC
Risks that may have been omitted, disguised or waived unintentionally in a contract can result in large financial losses that might not be covered by insurance.
As such, construction firms need to engage risk specialists who can provide comprehensive contract review. This process is critical to:
- Identify and evaluate indemnification and hold harmless provisions that do not coincide with current insurance contracts or exposures for which a company is contractually obligated
- Detect unreasonable insurance coverage requests that can have negative economic impact. (E.g. a waiver of subrogation on workers’ compensation)
- Evaluate the parameters of additional insured requirements. Do you really want to provide a defense for someone else’s sole negligence?
Lars Olson, vice president in the Construction Casualty Practice at USI Insurance Services in Bedford, NH, said USI frequently uncovers unreasonable terms and conditions during the contract review process.
“Most recently we reviewed a contract that required a tenant to hold the owner of a property harmless and indemnify this same owner for all costs related to a building fire,” said Olson, adding that tenant unknowingly accepted this financial obligation even though he had no control over the sprinkler system and maintenance at the property.