Our clients were shocked to learn how our dramatically different approach uncovered what we call “Risk Landmines” . . . loss exposures that pose the potential to make them responsible for claims broader than what their insurance policy would cover.
This type of landmine is frequently found in Indemnification and Hold Harmless Agreements, leases, contracts, and purchase orders.
It’s been our experience that many clients don’t realize that agreements they sign, that have been prepared by another party, include indemnification language that releases the drafting party from “any and all” liability. This wording is considerably broader than what their insurance policy actually covers and agreeing to it has the potential to cost them dearly.
You may ask…why wouldn’t my insurance policy protect me?
Typically, a Commercial General Liability policy only pays for bodily injury and/or 3rd party property damage resulting from negligence on your part. If you’ve signed an indemnification agreement releasing the other party for “any and all liabilities,” you’ve agreed, perhaps unwittingly, to pay for damages that are not the result of bodily injury, or property damage. Even if there is a loss under one of these categories, and it wasn’t the result of your “negligence,” your insurance carrier may be within their rights to deny the claim, leaving you to foot the bill.
Let’s use a couple of examples to illustrate:
The claim did not cause bodily injury or property damage:
Assume a contractor who has just won a bid for a new building project purchases a sizeable amount of steel for the structure. The contractor didn’t realize the Indemnification and Hold Harmless Agreement he signed released the project’s developer from “any and all liabilities.” Unfortunately, the project falls through, and the contractor is stuck with steel for which the developer refuses to pay. If the contractor sues the developer for his financial loss, neither his, nor the developer’s insurance will respond, because his loss results from neither bodily injury, nor property damage.
But…I didn’t actually cause the claim:
Let’s use another example. You’re a business that routinely hosts clients for meetings and are renting from a landlord with whom you’ve signed an Indemnification and Hold Harmless Agreement releasing him from “any and all liabilities.” One of your clients becomes injured after slipping on loose bricks on the outside stairs. Even though the claim caused Bodily Injury and the loose steps were part of the landlord’s property, you would end up paying for the claim because you’ve released the landlord from “any and all liabilities.”
So, if I’ve already signed these types of agreements, what do I do now?
Our process is to review contracts, leases, and purchasing agreements you’ve already signed to determine your relative bargaining power. There may be little you can do until the contracts are up for renewal; but if the negotiating power is even, or you have gained a better position, we can work with your legal counsel to restructure the agreement. More importantly, future agreements are better reviewed before they are signed.
It’s just one way our dramatically different approach can help you reduce costs, and better protect your business.