The Top Three Insurance Issues Facing Franchise Systems

As a member of our firm's insurance practice group, I am often asked by clients to conduct comprehensive insurance policy analyses to identify gaps in coverage and uninsured risks. When conducting these analyses for franchise systems I also typically provide a mark-up of the franchisor's form franchise agreement with my suggested edits and comments. I thought I would pass along my list of the top 3 issues I come across when reviewing franchise agreement insurance provisions:

1. The franchise agreement requires a "Certificate" as evidence of a Franchisor's Additional Insured Status. Certificates of Insurance confer NO RIGHTS TO THE HOLDER. It says so right across the top of the Certificate. It is useless for this purpose. You must always receive an endorsement to the policy clearly showing the franchisor as an additional insured and your franchise agreement should require as much. Otherwise, a franchisor can wind up without coverage under its franchisees' policies.