Clients often ask us to review the insurance clause in contracts they are asked to sign. However, unfortunately the contracts have often already been signed before we have a chance to review them. It should be the other way around.

Contracts are often prepared by legal teams or in some cases crafted from language pulled from the internet. While it is important to have the legalities in a contract correct it is equally important to have the insurance aspects correct. That is why it is important that these clauses be reviewed by your insurance agent is 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 insurance policy is also a legal contract, and the insurance company is only going to respond to the limits and conditions written there. It is important to make sure that the limits and conditions that 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 a contract. 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 first 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 before signing the contract. And a contract is a two-way street. What are the insurance requirements you want the other party to carry?

Because many contracts are written for land-based businesses, we often see general liability and workers compensation required for a vessel under contract. These coverages won’t respond to something that happens aboard a vessel, so a conversation with both parties about protection and indemnity that includes Jones Act crew coverage is recommended.

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

Chris Richmond is a licensed mariner and marine insurance agent with Allen Insurance and Financial. He can be reached at 800-439-4311 or [email protected]