In the title of this article, the “I” in “The ‘I’ Request” represents your choice of:

a.  Ignorant

b.  Incredible

c.  Incompetent

d.  Idiotic

e.  All of the above

A Texas agent shared this with me today. It’s the insurance requirement from a lease his customer is entering into:

INSURANCE. At all times during the Term and during any time when Tenant or its agents, employees or contractors may enter or occupy the Premises regardless of whether rent is payable thereon for any purpose, Tenant shall carry and maintain, at its sole cost Commercial General Liability Insurance applicable to the Premises, its appurtenances and Tenant’s actions and conduct of its business within the Building and Common Areas, providing, on an occurrence basis, a minimum combined single limit of $1,000,000.00, with a contractual liability endorsement covering Tenant’s indemnity obligations under this Lease….

Indemnification provisions in contracts are notoriously broad, many (if not most) being virtually limitless, and almost all of them being uninsurable. The contractual liability coverage in most CGL policies (usually provided as a limited exception to a contractual liability exclusion) is subject to the insuring agreement, exclusions, and limits of the policy. No CGL policy I’ve ever seen insures ALL contractual indemnity obligations.

One of the most onerous indemnification agreements I’ve seen is this one:

“To the fullest extent permitted by applicable law, Contractor shall insure and defend, indemnify, and hold harmless Owner and Agent and their respective officers, directors, members, employees, agents, shareholders, partners, joint venturers, affiliates, successors, and assigns from and against any and all liabilities, obligations, claims, demands, causes of action, losses, expenses, damages, fines, judgments, settlements, and penalties including, without limitation and without regard to the cause or causes thereof….”

Note that this contract provision also requires, in addition to indemnification, that “any and all” liabilities, obligations, etc. be INSURED by a policy with an infinitely broad insuring agreement (“any and all”), no limits (“without limitation”), and no exclusions (“without regard to the cause or causes thereof”). It can’t be done. It’s unclear whether the attorney (or risk manager, or agent, or underwriter, or whomever) who wrote this is unaware of that or simply follows the premise that it never hurts to ask for the impossible.

Make sure that insureds understand the importance of vetting the contracts they enter into and the reality that they will be asked to insure the uninsurable.

Photo by cdrummbks

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Bill Wilson

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One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information