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Insurance Clauses By Type, C-O
Recommended ClausesNotesWhen Do They Apply?
Commercial General Liability.  Contractor shall obtain, at Contractor’s expense, and keep in effect during the term of this Contract, Commercial General Liability Insurance covering bodily injury and property damage in a form and with coverages that are satisfactory to the State. This insurance shall include personal and advertising injury liability, products and completed operations. Coverage may be written in combination with Automobile Liability Insurance (with separate limits). Coverage shall be written on an occurrence basis. Combined single limit per occurrence shall not be less than $ _______for each job site or location. Each annual aggregate limit shall not be less than $ _______. 
  • This coverage is perhaps the most important of all insurance policies in a contractual relationship. It insures that the Contractor has broad liability coverage for contractual activities and for completed operations.
  • Usually excludes liability for pollution, and sex abuse.
  • Keep in mind that the contractual liability coverage is most likely limited to “liability for acts the insured would have in the absence of a contract."  Do not depend on this type of insurance to cover “the indemnity assumed under the contract."  If the risk of something going wrong is high or extreme, relating to contractual liability, it is important for your agency to analyze bonds, or other non-insurance risk control methods to handle these risks.
  • If excess or umbrella coverage is used to supplement the primary CGL policy, the excess coverage amounts must begin where the primary CGL limits end.
  • Alternative insurance called “wrap up " may apply on very large construction projects ($90 million in construction costs).
  • Goods with No Services: CGL coverage is not required. The major exposure from this service is bodily injury or property damage as a result of the delivery of goods onto state premises, especially the back up of the delivery vehicle.  If goods are to be delivered by the vendor, use the standard  Automobile Liability clause, and place the following phrase at the beginning of the clause: "If the Contractor or its sub-contractor delivers any product, this clause is applicable. If a common carrier is used, it is not applicable." - Use limits appropriate for the exposure.
  • Most Commercial General Liability policies exclude liability arising out of watercraft, so special coverage is needed. See Marine Insurance .
Setting Limits:   
  • Ask questions such as, but not limited to: How could the Contractor´s activities cause property damage or injury to others? What is the chance that serious damage or injury will occur? Will the Contractor have access to employees, clients, and/or confidential information? Where will the Contractor perform the contractual work - at home, on state premises, or at other locations?
  • Use in most services contracts, trade or professional, and most public contracts.
  • Depending on the outcome of a risk assessment , consider requiring whenever Contractor will be doing work on state’s property.
  • Use when state could be partially blamed for property damage or bodily injury caused by Contractor.
  • Use to provide financial support to keep Contractor in business even if sued.
  • Mobile equipment is often used in construction and resurfacing projects. This equipment is designed for use off public roads and is not subject to motor vehicle registration. When Contractors use mobile equipment require CGL coverage for the liability exposure arising from the Contractor´s operation of the mobile equipment. Also require automobile liability whenever the Contractor transports mobile equipment to the work site. (CGL insurance does not cover the transport of mobile equipment.) Insure automobile liability includes coverage for owned, non-owned or hired vehicles.
Employee Dishonesty, Third Party Fidelity Bond, and (when applicable) Money and Securities.  Contractor shall obtain, at Contractor’s expense, and keep in effect during the term of the Contract, Employee Dishonesty, Third Party Fidelity Bond, and (when applicable) Inside/Outside Money and Securities coverages for state-owned property in the care, custody, or control of the Contractor.  Coverage limits shall not be less than $ _______.  
  • Covers loss to money, securities, and property (other than money) caused directly by Contractor´s employees’ dishonest acts.
  • Property subject to loss by crime includes all kinds of real and personal property - with money, securities and jewels especially susceptible to loss.
  • Policy must include a Third Party Fidelity Bond, Inside/Outside Money and Securities Coverage. 
If the Employee Dishonesty Coverage is not specifically endorsed to include a Third Party Fidelity/Crime Bond, in most cases, it will not be comprehensive enough to provide coverage for a claim for theft by your Contractor or their employees that results in a loss for your agency.
Require Inside Money and Securities Coverage when the funds will be located "inside" of the premises.
Require Outside Money and Securities Coverage when the funds will be located "outside" of the premises in the care or custody of a messenger or armored car company.
Setting Limits: Evaluate exposure to dishonesty as basis for coverage limits. Limits should equal or exceed the maximum amount of cash or negotiable securities or vulnerable property at risk at any time. Note: Limits should be requested separately for each type of coverage.
Require larger limits if:   
  • A Contractor´s dishonest employee would have multiple opportunities to steal before your loss would be discovered. 
Require smaller limits if: 
  • The Contractor will have limited access to cash or negotiable securities, and  
  • Any contact the Contractor has with cash or negotiable securities is supervised by the state at all times. 
  • Use when the Contractor is handling your money, or has access to your negotiable securities, other valuable property, or data.
ERRORS AND OMISSIONS COVERAGE - See  Professional Liability Coverage.
Garage Liability. Contractor shall obtain, at Contractor’s expense and keep in effect during the term of this Contract, Garage Liability Coverage  for Garage Operations. Combined single limit per occurrence shall not be less than $ ____________.
  • Garage Liability covers the legal liability of auto dealers, garages, repair shops, service stations and other auto-related businesses for claims of bodily injury and property damage arising out of business operations. Includes premises liability, products liability and automobile liability coverages.
Setting Limits:   
  • Ask questions such as, but not limited to: Will employees or clients go to the garage to pick-up, drop off, or wait for vehicles? Or, will the Contractor pick-up and deliver vehicles? What is the chance that the maintenance, repair, or alteration performed on the vehicle will cause injury if not properly done?
  • Use for contract services involving auto dealers, service stations, auto repair shops, and other auto-related businesses.
Garagekeepers´ Legal Liability Coverage. Contractor shall obtain, at Contractor’s expense and keep in effect during the term of this Contract,  Garagekeepers´ Legal Liability Coverage for “Autos left for service, repair, storage or safekeeping."  The deductible  for this coverage shall not be less than $ _________.  Coverage limits per occurrence shall not be less than $ ________.  
  • Garagekeepers´ Legal Liability covers owners of storage garages, parking lots, body and repair shops, etc., for legal liability as bailees with respect to damage to automobiles left in their custody for safekeeping or repair.
Setting Limits:  
  • Insurance limits should be high enough to cover the value of any vehicles left for safekeeping (yours and others) at any time.
  • Review the limits that the Contractor carries to make sure that any per vehicle sub-limits are acceptable, i.e., a $10,000 sub-limit would not be adequate for a vehicle valued at $20,000. 
  • Use whenever  the contract involves leaving vehicles in the possession of any type of garage operation. 
Marine Protection and Indemnity Coverage. Contractor shall obtain, at Contractor’s expense, and keep in effect during the term of the Contract, Marine Protection and Indemnity Coverage.  Combined single limit per occurrence shall not be less than $ _______.

  • Coverage is provided for a wide range of liability exposures, most notably for: the liability of a vessel owner for damage to property struck by his ship (other than other vessels or property aboard those vessels) such as wharves, piers and other structures along waterways; damage to its cargo; injury or illness of its crew or passengers, and injuries to persons on board other vessels struck by the ship. Note: CGL coverage would still be necessary for shore side liability exposures, if applicable to contract services.
  • Marine Protection and Indemnity Coverage does not protect against physical damage to the hull of the owner´s  vessel or for damage to other vessels and their cargoes as a result of a collision with their vessel. If you are concerned about this exposure, consider requiring hull insurance with collision liability coverage.
  • Marine Protection and Indemnity Insurance covers the cost of raising, destroying, or removing the wreck when a ship owner´s vessel sinks and constitutes a hazard to navigation.
  • Marine Protection and Indemnity Coverage excludes most pollution exposures.
  • Marine Protection and Indemnity Coverage insurance is issued on a “claims made” basis. Require "Tail" Coverage for all "claims made" coverage.
Setting Limits:  
  • Ask questions such as, but not limited to: What types of property could be damaged if struck by the Contractor´s vessel during the performance of contractual activities? Are wharves, piers or any other structures located along the waterway where the activity will take place? What is the usual amount of vessel traffic in the area? What types of vessels will be in the area? What types of cargo are normally carried? Do any of these vessels carry passengers?
Revised 4/04
Assess the risks of the particular contract to determine appropriate insurance limits and risk control measures.

Do not rely on insurance or bonds to cover all of the risk associated with your contract.
Many times outcome based statements of work, contract administration, and supervision are far better risk control measures to protect the state's interests than insurance or bonds.