Supplier Insurance - Part 2

Supplier Insurance - Part 2


In many situations, requiring suppliers to have specific
insurance coverage is critical. However, not every
supplier insurance clause is created equal.

Carefully crafted supplier insurance clauses can provide
more risk protection to your organization, keep your
organization's insurance claim history cleaner, and make
collecting on claims less cumbersome. Here are three
components of an advanced supplier insurance clause.

Buying Organization Named As Additional Insured. Having
your organization named as "an additional insured allows
you to be a direct beneficiary of the [suppliers']
insurance policy," explains Brian Foont, an attorney and
the founder of The Foont Law Firm, LLC. "If [suppliers]
cause a casualty, I can go directly to their insurance
company and file a claim as though I was them." Not
having to go through the supplier to file a claim
"presents a significant benefit in that I don't have to
litigate with them to compel them to go and make that
claim," according to Foont.

Primary Without Right of Contribution. "This means that,
if there is a casualty, we look only to the supplier's
insurance and not to the [buying] organization's
insurance," Foont states. "That is, the supplier does
not get to benefit from insurance that the [buying]
organization may happen to carry. This is important
because one of the key benefits to having your supplier
carry insurance is avoiding claims against your own
insurance and thereby developing a claim history [which]
is a significant factor in increasing your insurance
costs."

Breach of Warranty Clause. "When you purchase insurance,
the warranties are what the insured is telling the
insurance company they will or won't do," Foont says.
"A breach of warranty clause in favor of an additional
insured would say that even if [suppliers] violate that
warranty," the insurance company will still provide the
insurance to the buying organization.