Our clients frequently ask us to review the insurance clause in a contract before they sign. Unfortunately, in many cases, the contract has already been signed before we have the opportunity to review it. Contracts are often prepared by legal teams or pulled from the internet. While ensuring legal accuracy is important, making sure the insurance provisions are correct is equally critical.
A properly drafted and signed contract is legally enforceable. However, just because you have signed the document does not mean that your insurance policy will react to it. Your insurance policy is itself a legal contract, and the insurer will only honor the limits and conditions stated in that policy. You should always make sure the limits and conditions of your insurance meet the requirements of the contract you are signing.
Besides limits, there are often other stipulations that need to be verified with your agent before signing. Contracts often include clauses such as waiver of subrogation and hold harmless provisions. While these can be very beneficial to the party requesting them, they need to be approved by your insurance company beforehand. Contracts often include the words “any and all” when referring to risks covered. Your insurance policy most likely will not react to “any and all” claims made against it, which is why it is so important to have these clauses reviewed beforehand.
If your contract only involves a vessel, then any General Liability and Workers Compensation limits that are required will most likely not apply. Your hull and protection and indemnity policies will react to claims made against the boat. Convincing the other party to accept this reality is challenging and often futile. This is when you should get your insurance agent involved to help sort out the wording and coverage issues.
Contracts are required for a variety of different occasions. A standard boilerplate contract rarely fits your unique situation. Contracts are also negotiable. It is wise to involve your insurance agent in this process before signing the document.
