This Special Report was written by Kenneth R. Hale, J.D., CPCU, AAI, LIC of Marsh & McLennan Agency LLC.

We hear this from clients all the time, and the answer is that it is not enough!
The reasons are as follows:

The contractor’s insurance may not protect you – even if the policy lists you as additional insured. There is a real possibility that an incorrect additional insured endorsement will be used and that the contractor’s insurance limits will be insufficient. Furthermore, the issuance of a certificate of insurance does not amend the actual coverage which is controlled solely by the policy – not the certificate.

The contractor’s insurance company can actually sue you to recover what it pays if they can prove that the injury was caused entirely, or in part, because of your own negligence.

Although it would be nice that your contractors have insurance and even give you a certificate of insurance, you cannot rely on someone else’s insurance to protect your assets. The certificate of insurance is basically only worth the information that is provided. The missing ingredient is an indemnification agreement whereby the contractor agrees to indemnify you, that is to assume any claims made against you arising out of its operations, and provide that its insurance will be primary and not contributory to your insurance.

Absent having this, if any contractor’s employee is injured on your property, the employee can sue you. If the contractor causes injuries to other people, they can also sue you. You will have to incur the legal defense costs to defend these cases and pay any judgments that may arise out of that litigation to the extent that you are not insured.

Even if the contractor has insurance it may not be up to the standards that you require; and therefore, you need an agreement setting forth the specifics of the insurance the contractor is to provide for you. In summary, you need to have a well drafted insurance requirements and indemnification agreement. But even with this, never rely on this insurance and indemnification to protect your assets. Be sure that your insurance program has adequate limits and coverage.


For more information about this topic please see page 8 of this issue.

Mr. Ken Hale can be contacted at 734-525-2412 or More Special Reports are available at