Insurance Clauses: Part 1 – Another way to manage risk?

WHO SHOULD READ THIS

• Anyone involved in contract negotiations and procurement

THINGS YOU NEED TO KNOW

• Insurance clauses can offer an alternative way to allocate and fund contractual risk.
• Allocation of risk in this way can lead to more efficient and cost effective project insurance programs.
• Successful risk allocation using this strategy requires careful analysis on a case-by-case basis.

WHAT YOU NEED TO DO

• Check whether your contract contains an insurance clause and consider how it interacts with any indemnity clause.
• Make sure that appropriate insurance cover is in place to satisfy the requirements of the insurance clause.

In our last focus article, we looked at common types of indemnity clauses, how they operate and some of the practical limitations associated with their use in contracts to manage and allocate risk where these clauses do not align with the available insurance cover.