Clients often ask me to review insurance clauses in contracts that they are asked to sign. Unfortunately, often the contracts have already been signed before I can review them. It should be the other way around.

Contracts are often prepared by legal teams or in some cases crafted from boilerplate language pulled from the internet. While it is important to have the correct legalities in a contract, it is equally important to have the insurance aspects correct. That is why a conversation with your agent is important before you sign on the dotted line.

A contract, when properly drawn and signed, is an enforceable document. But just because you have signed the document does not mean that your insurance policy will react to it. Your policy is also a legal contract and the insurance company is only going to respond to the limits and conditions spelled out in it. It is important to make sure that the limits and conditions you are insured for will meet the requirements in the contract you are signing.

There are often other stipulations that need to be verified with your agent before signing. Waiver of subrogation and hold-harmless clauses are often inserted in a contract. While these can be very beneficial to the party requesting them, they need to be approved by your insurance company. 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. Again, have these clauses reviewed beforehand.

More often than not, a contract will request insurance coverage that does not pertain to your operation or vessel under those circumstances. Your hull and P&I policies will react to claims made against the boat. But getting the party who is requesting these limits to understand this can often be futile. Get your insurance agent involved to help sort out the wording and coverage issues.

Contracts are required for a variety of different occasions. A boilerplate contract most likely will not fit your unique situation. Contracts are also negotiable.

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