As transactional lawyers, we can already hear it — you know what insurance is. However, did you know that a promise to procure insurance for another party can sometimes equal an obligation to cover the loss the insurance would have provided if you don’t procure it? In other words, if you promise to insure another party in conjunction with a commercial agreement, you become the insurer if the agreed-to coverage is not purchased. For this reason, insurance provisions in commercial agreements can have enormous financial consequences, particularly when a loss occurs which would have been covered by insurance required by the agreement. As is often the case with indemnity provisions, insurance clauses are sometimes drawn from old, unrelated agreements, and your contract might wind up with unfair or insufficient insurance provisions. Make sure the insurance clause fits the deal.

Next time you negotiate a commercial agreement, make sure that you are best protecting yourself and avoiding unintended financial risks by including appropriate warranty, indemnity and insurance provisions that reflect your intentions and are enforceable under the state law selected in the agreement. Happy contracting.

At Incline Law Group, LLP, we are always happy to review our clients’ standard contracts and provide advice that will make your agreements stronger.


Jeremy Krenek

(775) 831-3666

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