Businesses and venues frequently require vendors to carry insurance that protects against third-party bodily injury and property damage claims. This requirement will usually be outlined in their contract for hiring them for an event or project.
Contracts often stipulate Umbrella/Excess Liability policies to provide higher limits when the existing CGL or product/completed operations policies reach their limit. Monitoring such COIs is critical in mitigating risk and maintaining compliance.
Coverage Requirements
Insurance protects vendors against financial loss should any liability claims be filed against them by their clients, thus making using insured vendors an essential component of facilities management.
Businesses looking for evidence that a third-party provider carries sufficient liability coverage typically request a Certificate of Insurance (COI). Insurance carriers themselves generate and deliver this document which details policyholder coverage types, limits and effective dates.
General liability policies provide coverage against common operational risks like property damage and bodily injury caused by vendors during their services, while workers’ compensation and environmental liability offer more specific protection against hazards specific to certain vendors – for instance food and beverage vendors may need commercial general liability specialized for food service work while hazardous waste cleanup vendors will likely need additional protection with an environmental policy in place.
Errors and Omissions policies from certain third-party vendors provide added protection from client claims related to recommendations provided. Facility managers who employ outside consultants like architects or engineers may find such cover invaluable.
Contractual Requirements
As part of their risk transfer processes, facilities managers must determine which insurance requirements are necessary based on the work being performed. This may involve multiple policies and endorsements such as additional insured, contractual liability, workers’ compensation and crime (for vendors working at company or customer locations).
Commercial general liability is the most frequently required form of coverage to safeguard against bodily injury and property damage that might occur on client facilities. Some contracts also call for errors and omissions (E&O) coverage to protect against negligent advice or service provided to clients, while property/cyber, workers’ compensation and umbrella/excess liability policies are often sought by clients as additional types of protection against losses that might incur as well.
Every vendor should be required to present a Certificate of Insurance (COI), outlining their specific insurance needs for performing work for your organization. For easy review and compliance tracking purposes, COIs should be stored centrally or managed via software for easy review and monitoring – it’s crucial that policies expire and insurers change; consequently it’s vital that vendors contact each other so that their policies stay compliant.
Organizations needing insurance requirements can benefit from setting forth specific criteria in their insurance requirement templates to reduce risks while remaining competitive in the marketplace. Partnering with your legal team to develop top-of-the-line templates that ensure consistency and accuracy across your organization.
Additional Insureds
Many insurance policies contain complex details and disorienting language that is difficult to interpret, necessitating facility managers with the expertise necessary to interpret them to verify third-party providers maintain sufficient coverage according to regulations and carrier requirements – failing which their premium could increase, possibly passing onto their clients as increased premium payments.
An easy way to assess a vendor’s coverage is to request their certificate of insurance. This document details their policy details such as its limits and effective dates, while also verifying if they have been added as additional insured on your liability policy – doing this ensures any gaps are covered effectively while helping protect limits within your own policy.
Prior to contract execution and approval, you should ask your vendors to add your organization as additional insureds in case an accident or mishap arises while working on your property. By doing this, your organization will be protected against potential financial losses due to incidents caused by them while on site.
Based on your particular requirements, vendors may need to carry different types of insurance. Some businesses prefer that vendors obtain business owners policy (BOP), which combines general liability and commercial property coverage into one policy and covers damages to your premises or equipment, lawsuits arising from third-party property damage claims as well as personal injury suits from third parties.
Policy Limits
Vendor insurance policies offer third-party providers protection from potentially devastating liability claims, often necessitating higher limits of coverage than other forms of commercial policies. Depending on their needs, vendors may also require specialty policies like product liability or workers’ compensation coverage.
General liability policies are the go-to protection policy for vendors, covering bodily injuries and property damages caused by their operations to third parties. Professional liability (also referred to as errors and omissions, E&O) policies offer additional safeguards against client claims for incorrect advice or services rendered. Property/inland marine insurance provides protection from theft or property damage to equipment or goods, while worker’s compensation covers injuries or illnesses sustained on-the-job. Many contracts also stipulate umbrella or excess liability coverage to increase limits of commercial general liability policies such as general auto and employer’s liability policies when claims reach their limit.
As a facility manager, it’s your duty to verify each policy’s existence and meet your insurance requirements before working with any vendor. Establish a system that collects certificates of insurance (COIs) from all your suppliers, then follow up regularly with them to make sure their information is up-to-date and correct. In addition, take time to thoroughly assess each policy’s limits, deductibles and exclusions to protect your company against unexpected damages.
